The Ultimate Guide to End-of-Year Financial Planning

December 9, 2022
7 min read
Thomas Kopelman

Anytime is a good time to work on your finances. However, most push it off as long as they can. Year end is a great time to check in how you did, maximize some accounts before it’s too late, and come up with your plan for next year.

The problem is that most do not know where to start and what all needs to be thought about - that's why we created this guide, to help answer all these questions for you.

Review Your Spending From Last Year

A lot of people would push this down the list, but I fully believe that understanding your spending and cash flow is priority number one as a millennial. You can use a budgeting app/software, or can pull this date and manually calculate it all yourself. Do this, at least once per year to see what you spent last year and on what. This will help you understand what changes, if any, need to be made for next year.

Analyze Your Total Savings

You also need to go back and see what your total savings were for last year. How much did you invest in your 401(k) (with the match), your HSA, Roth IRA, taxable account, etc. Total this all together and see what your savings rate was based on your income. A good goal to shoot for is 20% of your gross income.

Calculate Your Net Worth

Go and add all your assets and then subtract your liabilities from that. This will give you your net worth. You should be tracking your net worth every year to see the progress you are making. This is a great way to quantify what you are doing to help you stay on the right path.

Conduct a year-end tax review

Tax time may not be until mid April, but there’s a ton of tax planning that can be done before the end of the year. Here are some things to consider:

  • Harvesting some gains on investments
  • Tax loss harvest some investments that are down
  • Add more contributions to your HSA, 401(k), etc
  • Contribute to a 529 plan for your kids college
  • Accelerate some expenses for your business to get the deduction this year
  • Give to charity

Create A Financial Plan For Next Year

Whether you had a plan for this year or not, you need to sit down and create a financial plan for next year. Make sure you know what you will be investing, in what accounts, how much, etc.

  • What will you need to save for?
  • Do you have enough insurance?
  • Is your estate planning done?
  • What are you going to do with your equity comp?
  • What will you do with your bonuses?

These are a few things to consider, and it will be different for each person and their situation.

Just do not put off creating a plan.

Remember, “a goal without a plan is just a wish.”

Assess Your Investments

I'm a firm believer that you should be investing for the long term vs trading in the short term. However, that does not mean you should never make changes to your portfolio. You may need to rebalance and move your allocation back to your target allocation. You may need to take some winnings off the table and harvest gains. You may need to sell some of your equity comp. You also may need to tax loss harvest and give up on a few investments.

Take the time to think this through.

You also may want to contribute to your Roth IRA, traditional IRA, etc. You have until April 15th of the next year to get this done.

Review Your Credit Score/Report

This one is super easy and important to do. You never know if something happened in the background to hurt your credit store.

It's a no brainer to at least once a year do a deep dive and make sure there are no surprises here.

Review Your Estate Plan and Beneficiaries

If you have not done either of these yet, the time is now. But if you have, you need to go back and review them. Did you have another child or pet this year? Did you buy a new asset?

Make sure both of these are up to date just in case you were to pass away.

Review Your Insurances

Not only do you need to review car insurance, homeowners insurance, health insurance, etc on a yearly basis.

You also need to review your life insurance and disability insurance to make sure you have the right coverage. Both of these, but especially disability insurance is overlooked.

This might sound like a lot, which is why people hire financial planners, but it is so important.

Money is a huge part of life, and you need to make sure you have a plan and are doing all the right things.

Your family will thank you for it later.

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