When the sun harnesses the power of its heat and fresh snowfall covers the ground, the end of another year has once again arrived. This is one of my favorite times–lights hung on a tree, warming by a nice fire, sounds of family ringing through the air.
In addition to the warming aesthetic, the end of the year is also a great time to look back on the year and think of everything that happened: happy moments, hardships endured, challenges overcome, unexpected joys, everything.
When looking back, in addition to the other important areas of life, take some time to assess your financial situation and how it fared during 2020. Maybe you had one of the best financial years in awhile or maybe you can find some crucial areas for improvement. Either way, it is good to see what financial decisions you made and how they impacted you so that you can alter your plans for next year.
I have put a financial flare on the traditional holiday list to help you think through your financial plan and set yourself up for a prosperous 2021.
Financial Christmas List
Lists are a great tool for staying organized. When I first begin a project, I make an effort to put a list together of each component so that I do not overlook any detail and stay on track. I have made a financial Christmas list for you to refer to as you work to keep your finances in check..
- Did you hit your savings goal?
Saving can be a difficult feat, mostly because there are so many things to save for: retirement, education, a house, travel, and other recreational spending.
What tools did you use to reach your savings goal this year? Opening a new savings account, a 529 plan, an IRA, a bond, or certificate of deposit are all avenues for saving money. Asses which worked out best for you this year. If you did not reach your goal, why not? Could opening one of the accounts above help you in the coming year?
- Are you keeping up with your debt?
Debt is one of the most difficult problems families face. Without a clear payment strategy, debt can pile up and weigh you down. Take a look at some of the debt you may have incurred or any ongoing payments: mortgage, student loan, credit card. Get a realistic sense of how much money you contributed to paying off that debt this year and how you can improve upon that number next year.
- Have you contributed to charity?
Giving is one of the most wonderful things we can do for society. Through it, we are able to help organizations give resources to those who desperately need them. Charitable giving is important both morally and financially. Since there can be some tax benefits that accompany charitable gifts, it is a good idea to think about different ways to contribute to a charity this year such as gifting clothing or household items, a traditional check, or even appreciated assets.
- Are your tax documents organized?
I know that very few of us like to talk about taxes. But being prepared for them will only make the process less painful when it (inevitably) arrives. The end of the year is a good time to make sure you have everything you need for tax time: social security numbers for yourself, your spouse, and any dependents, all W-2 documents and/or 1099 forms for proof of income, all income channels, a list of all deductible items, as well as any and all government benefits like Social Security. For a complete list of documents, see the IRS website.
- Is your estate plan in order?
Now is a great time to make sure that your beneficiaries are up-to-date and that your estate plan is spruced up. Making these adjustments as they occur is the best way to make sure that everything is running smoothly.
- Have you contributed to your benefits plan? (401k, IRA, HSA/FSA)
Are you aware of all of the benefits your company offers you as an employee? Now is a great time to look at your benefits plan to make sure that you are enrolled in the plan you need and are regularly contributing money to those plans.
Contributing to your workplace 401K or your individual retirement account (IRA) are great ways to help meet your retirement savings goal. Retirement savings is something that should be grown over time and establishing a healthy contribution pattern this year will set you up for a bright future.
Healthcare can be one of the most expensive benefits we have in the modern world. In order to help offset this cost, many employers offer health savings accounts (HSA) or flexible spending accounts (FSA). Have you been contributing to these accounts this year? If you are planning a big surgery in 2021 or are anticipating some other expense, putting in pre-tax dollars into these accounts is a great way to save for your health.
- How is the health of your investment portfolio?
Take a look at how your investments are doing and look to see if there are any changes that you should make going into 2021. If you are unsure, you can always seek professional advice.
- What goals did you miss?
It can be disappointing to not reach one of your goals. Can you figure out why particular goals weren’t able to be met? Perhaps you can reevaluate and modify a larger goal into a smaller more achievable one in order to achieve it before 2021. That way you are starting off the new year on the right foot.
This list can be a bit overwhelming as it asks you to really look at your 2020 financial profile in a critical way to ascertain the good and the bad and why each of those things happened. The why is the most crucial part as it will help you make any adjustments for the new year. If you need any help in developing a plan to reach your 2021 financial goals, please reach out as I would love to speak with you.
This content is developed from sources believed to be providing accurate information, and provided by Kelly Financial Planning. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.