Broker Check
10 Ways to Prepare  your Finances for the end of the Year

10 Ways to Prepare your Finances for the end of the Year

October 04, 2021

Want Part Two of This Video? Click Here to View it on Our YouTube Channel!

As we enter into the last few months of the year, it is always important to begin to remind ourselves of all the tasks that need to be taken care of before the new year arrives. Several of those tasks include financial activities, and while it may be a bit of a bore to review statements and reports, it never hurts to pay attention and plan ahead for your future. We have compiled a list of the top 10 things to make sure you take a look at before January first arrives, some are big and some are small, but they all play a crucial rule in securing your financial freedom and making sure your future is bright!

1. Consider how well you stuck to your budget over the year

 Setting a budget at the beginning of the year, or each month is always a great idea to keep track of spending and saving. What is even harder however is reviewing how well you kept to that budget at the end of the calendar. Did you over spend in certain areas? Or did you not save nearly enough as you would have liked? Reviewing your budget performance answers all these tough questions and allows you to make adjustments for next years budget. Maybe you stuck perfectly to every penny on your budget, in that case treat yourself to a little reward and get going on the next one!

2. Review the coming years new tax laws

Tax law changes all the time, and each year you can expect big or small changes to how they will effect your finances. Luckily with the internet today these changes are very easy to find and read up on, making you always prepared for what's coming next. Consider the following example to see why knowledge of tax law changes could pay off big. Let's say the current years long term capital gains tax rate is %15 based off your income, and the upcoming year it is going to change to %25. It would make a lot of sense to put time and thought into whether or not you should sell some of your investments this year before the tax goes up %10.  

3. Review your beneficiaries and make adjustments as needed


In the unfortunate event that your lost a loved one this year, it may be a good idea to consider if that person is listed as a beneficiary to any of your life insurance or retirement accounts. Keeping your beneficiary up to date means that your money when you pass away will go entirely to correct person and avoid any probate courts, which can waste a lot of time and money for your family. 

4. Review your investments 

Checking out your portfolio every single day may drive you a little crazy with all the up and downs, but the end of the year is a perfect time to review the performance of your investments, whether that's individual stocks, your 401(k) or any other funds you are currently invested in. Maybe you aren't performing how you would like to or are ready to move on from some investments, now is a great time to make those hard decisions and adjust your strategy going forward. Yearly performance also helps you see the ebbs and flow of the market and how what seems big on one day, doesn't really amount to that big of a change in the grand scheme of things. 

5. Rebalance your portfolio 

Balance to your portfolio is great strategy to always remain in a good position and assure you are well diversified. Assume you own 10 stocks and each makes up 10% of your portfolio at the beginning of the year. Over the course of the year one of those ten stocks may have gone up 5% but another goes down 5%, so you did not lose or make any real investment money. A good idea to do if this occurs however is to sell your 5% gain on the one stock that went up and sell the remaining 5% in the stock that went down, and with the combined 10% of your portfolio, purchase a new stock that you think has better potential than the one that lost you money. At the end of the year you have not gained or lost any money but you are in a better position to make more in the future. 

6. Tax loss harvesting 

If you sold off any investments this year and suddenly find yourself with a big realized gain on your hands, you're probably not too ecstatic about the amount you'll have to hand over in capital gains tax, be it short or long term. A smart way to get rid of some of these pesky taxes is to sell off some of your investments that have taken a turn for the worst and wound up becoming losses. These losses are then netted against your gains, and with less reported gains comes less taxes due. This also allows you to consider investing in different options if a particular investment wasn't going so good.

7. Review your short and long term goals

How to Set the Right Business Goals to Scale Your MSP

The whole point of investing and saving your money is what you will eventually use it for, like your retirement and giving back. It is a good idea to always have short and long term goals in all aspects of life but certainly with finances, because typically that is what helps you achieve many goals. Keeping track of your progress to goals is a good encourager to keep working hard and saving correctly, eventually the time will come to put all that money to use!  Consider if any goals changed over the year, are you still happy with where you live? Do you feel like you still need to be saving for that big purchase? Maybe you were inspired by someone over the year and a huge new area of life was opened up to you and you would like to devote a lot of your money to this new aspect of living.

8. Contribute to your 401(k)

You have until December 31st to contribute to your 401(k) up to $19,500 each year. Maximizing your 401(k) contributions means you are getting the most out of your employers match, and getting extra money each year.  

9. Charitable donations and Qualified Charitable Distribution deductions

How to give to charity at Christmas

With the end of the year comes the season of giving, and with giving comes deductions. While the standard deduction may be bigger than ever now there is still a possibility that you may choose to itemize your deductions if they are above the standard for the year, now may be a good time to look at how much you have donated over the year and consider giving even more if you do not need the money now. Another big thing to do with charitable donations are Qualified Charitable Distribution deductions (QCD). If you are over 72 you are required to take out mandatory distributions from your retirement accounts each year, and these distributions do count as income which can effect your taxes. Thankfully the government allows you to remove these distributions from your income if you donate them to a qualified charitable organization.

10. Spend a little left over money on something fun

With the end of the year comes the holidays, and while they usually bring out a lot of joy and peace, they may also instill a bit of stress now and again. If you have some leftover spending money after your gift shopping and meal prepping, it may not be a bad idea to treat yourself a little and get a gift for yourself or go do something fun for a bit. You don't have to save all the fun for Thanksgiving or Christmas, spend some money and time on yourself or family between it all.  


The time to consider your year end plan is now! Give us a call at  417-860-5678