As we wrap up 2023, spend time with loved ones, and await the coming of a new year, it’s a great time to knock out a simple year-end financial planning checklist. This can help you check in and celebrate the progress you made this year while setting yourself up for success in 2024.
Whether prompted by your own financial situation or by the economy, your finances may have changed this year, and taking the time to do a financial and investment review can help you make any necessary adjustments for the coming year.
Completing your financial checklist can also help you prepare for tax season and potentially reduce your tax liability. Set aside some time to accomplish these seven tasks this week:
- Review your financial plan.
- Assess your income and expenses.
- Take full advantage of your employee benefits.
- Conduct an investment review.
- Maximize your charitable contributions.
- Evaluate your taxes.
- Look over your estate plan.
As you check off items on your year-end list, you’re helping to set the stage for a more organized financial future.
1. Review Your Financial Plan
Did you achieve your financial goals for this year? Did you have any significant life changes this past year that may have impacted your financial plan? Is your financial plan still in line with your financial goals?
Review where you’re at, where you want to be, and your short-term and long-term goals, to evaluate your progress and ensure you’re headed in the right direction in the new year.
2. Assess Your Income and Expenses
Reviewing your income and expenses over the past year can give you a clear picture of your finances and help you in year-end tax planning — review all your sources of income in addition to your salary, such as bonuses and dividends.
Look over and categorize your expenses, which can not only give you an idea of your spending but also help you optimize your tax deductions. Understanding your spending patterns throughout the year can also empower you to create a successful budget for the coming year.
3. Take Full Advantage of Your Employee Benefits
Evaluate your employer-sponsored retirement accounts to confirm you’ve maximized your contributions. If you’re not maxing out your contributions, make adjustments for the next year so that you’re taking full advantage of retirement savings and optimizing your potential tax benefits. And if you’re 50 and older, verify you’re also maximizing your catch-up contributions.
Take the time to also review your other employee benefits, such as your equity compensation (stock options, restricted stock, etc.) and your health spending account (HSA), if you have one. Check that your beneficiaries on your employer-sponsored accounts are up to date.
4. Conduct an Investment Review
Conducting an annual investment review includes evaluating the asset allocation and risk management of your investment portfolios. Allocations can shift with underperforming and overperforming assets throughout the year, and rebalancing your portfolios can help ensure your allocations are still in line with your financial goals.
Review your risk tolerance to check if it’s aligned with your timeline and objectives; for example, you may consider shifting to a more conservative investment plan if you’re getting closer to retirement.
Confirm you’ve contributed to your individual retirement accounts (IRAs) and other investment accounts to reduce the impact of taxes. You can also review the tax diversification strategy in your investment portfolios to ensure you’ve established a strong tax foundation to make the most of your wealth in the future.
5. Maximize Your Charitable Contributions
Charitable giving can not only help you impact others’ lives and your community, but it can also supplement your investment planning, tax planning, and estate planning efforts.
Have you taken advantage of the tax savings from your charitable contributions? Make sure you’ve maximized your charitable donations to support causes meaningful to you while also minimizing your tax liability.
If you haven’t incorporated these strategies into your charitable giving, consider Donor-Advised Funds (DAFs), charitable trusts, private foundations, or Qualified Charitable Distributions (QCDs) in the coming year to benefit from the tax advantages of giving.
6. Evaluate Your Taxes
While taxes aren’t due for a few more months, year-end tax planning allows you to be prepared for tax season and take full advantage of any potential tax savings.
Did you experience any life transitions this past year such as marriage, divorce, the birth of a child, or retirement that could affect your tax withholding status?
Review any major financial transactions, investments, or income changes this past year; by understanding the tax consequences, you can strategically plan for minimizing your tax burden.
Evaluate your anticipated income in the coming year, and see if delaying or expediting any financial activity such as property sales, taxable transactions, bonuses, deductible expenses, or charitable contributions could potentially offer tax advantages.
Consider tax-loss harvesting for your investment portfolio: sell investments that have experienced a loss to offset your investment gains and reduce your overall tax liability. Also, verify you’re benefitting from tax credits you may be eligible for, including education credits, child tax credits, or energy-efficiency tax credits.
Tax law is constantly changing, and your tax implications can shift with these changes. Remember to stay informed on the latest rules and regulations (or work closely with someone who does).
To reduce the stress and anxiety of tax season, it may also be helpful to gather and organize your financial documents for tax preparation. Having easy access to the documents and information you’ll need will give you a head start on streamlining the tax filing process.
7. Look Over Your Estate Plan
Estate planning is essential to securing your legacy and ensuring that your wealth is distributed according to your wishes. Review your wills, trusts, and estate plan to make sure that they reflect your intentions and financial objectives.
If you’ve experienced any life events such as marriage, divorce, the birth of a child, or any other change in family dynamics, review and adjust your estate plan if necessary. It’s important to confirm the beneficiaries and trustees on your accounts and your estate plan to make certain these designations are up to date.
Consider also taking advantage of the tax benefits of monetary gifts, as well as the lifetime gifting exemption, to reduce your tax burden. As mentioned before, tax law continually changes, so keep abreast of the latest rules.
Navigate Your Checklist with Legacy Planning
Completing your financial planning checklist can help you navigate the year-end with confidence, ensure you’re on track with your financial and investment goals, and help lay the foundation for another successful year ahead. Remember that being proactive with your financial management is a year-round endeavor, to reap the potential benefits of a secure and healthy financial future.
At Legacy Planning, we’re dedicated to helping you reach your financial, investment, and retirement goals. We can help you tackle your year-end checklist, and work with you on financial planning, tax planning, and estate planning strategies to help you grow and preserve your wealth through every year. Click here to schedule a conversation today!
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.
