Personal Finance: The passage of another year has flown by, and already we are contemplating the year 2024. Additionally, those recurring resolutions accompany the start of a new year. Although one’s priorities may include fitness or organization, now is also a good time to reassess the financial situation of the household.
As we have learned through experience, employing protocols is a simple and effective method for upholding financial discipline. By adopting this methodology, one guarantees a comprehensive evaluation of their financial situation, encompassing the establishment of feasible savings objectives and the development of an earthly budget. We have compiled the following list to assist you in managing your finances throughout the year.
6 essential personal finance checks you must do before the year ends
January: Establish your objectives
A goal is the foundation of every New Year’s resolution, and your financial resolutions are no exception. Commence by formulating a budget to precisely comprehend your financial situation. Examine your cash flow carefully and differentiate between necessary expenditures, such as groceries, petroleum, and utilities, and those that are avoidable, such as recurring dining out or unused subscriptions.
Schedule or modify contributions to your IRA and 401(k), if you have not done so already. Whether your goal is to increase your retirement savings or to begin saving for retirement, the first step is to create a well-organized budget. Make a monthly investment commitment of a specific amount or percentage of your income after you have a comprehensive understanding of your expenses. Always keep in mind that even a marginal monthly increase in savings can accumulate to a significant amount over time.
February: Streamline
Similar to listing the organization of one’s household as a priority for 2024, it is prudent to apply the same approach to one’s financial accounts. Bear in mind to thoroughly examine every detail as it pertains to tax season. Do you possess a defunct 401(k) lurking about? You can streamline your finances and ensure that you have access to all account information by consolidating your accounts.
March: Tax preparations
A derailed train in February is acceptable. However, now is the time to organize your finances and documents in preparation for tax season. Remember that the deadline to file taxes for 2024 is April 15. Does it require additional time to file? One potential course of action is to request an extension of the deadline to October 15th. It is essential to observe that this is merely a filing extension and not a payment extension. While it is recommended that you submit your tax return or extension by April 15, you must do so to avoid incurring any penalties.
It would be prudent to allocate the funds from a tax refund toward savings rather than expenditures. Contribute to that account any shortfall in emergency funds relative to the three to six months of living expenses that are advised. If the balance of your emergency account is satisfactory, you may wish to allocate your refund towards an interest-bearing account.
Also, remember to contribute to your IRA and HSA. For 2023, the deadline to make contributions to an IRA and HSA is April 15, 2024.
April: Debt Review
Managing debt can impose a substantial financial strain. Consider applying a tax refund toward the reduction of high-interest debt, such as outstanding credit card balances. In addition to mitigating financial obligations, this strategy has the potential to alleviate tension and potentially enhance credit ratings.
Now is also an opportune moment to assess your credit score, should you not have done so previously. Although numerous credit card companies offer this service without charge, each of the major credit bureaus also provides an annual report at no cost. It is essential to maintain control of your credit to prevent errors from appearing on your report. It also assists in the identification of financial position improvement opportunities.
May: Concentrate on learning
During this transitional period from the academic year to the summer, it is opportune to contemplate educational savings for one’s offspring or future descendants. Presently, 529 plans are more adaptable than ever before, permitting tax-free appreciation on a wide range of educational expenditures, including vocational training and traditional tuition. A 529 plan is an excellent method to invest in the education of future generations while growing wealth tax-free.
Mid-year check-in in June
As June signifies the midpoint of the year, it is opportune to assess the extent to which one has adhered to their financial objectives. Have you maintained attendance? Have you become disoriented? Utilize this occasion to reassess the budget and objectives that were initially documented at the commencement of the year and modify them commensurately in light of any evolving priorities.
Preparing for Financial Independence in July
The month in which our nation celebrates its independence is an ideal time to make the necessary preparations to attain financial independence. Conduct a thorough assessment of your investment portfolio and asset allocation. Inquire with your financial advisor about the extent to which your holdings are diversified and devoid of superfluous overlap.
While summer can be an enjoyable time, it can also be quite costly. Spending irresponsibly during the summer will prevent your enjoyment from impeding your larger financial objectives.
August: Insurance Update
In the fall, when August arrives and students return to class, our daily lives frequently return to more set routines. Currently is the perfect time to apply the same degree of organization to your financial affairs, with a particular emphasis on insurance. Utilize this occasion to reevaluate and revise your diverse insurance policies. Maintain life, auto, disability, and home insurance that are up-to-date and sufficient to meet the expanding needs of your family. Now is the time to enroll in a discount program such as the Good Student Driver Discount if you have not already.
September: Donating Considered
In September, as the year draws to a close, it is prudent to reflect on your charitable contributions. Reflect on your charitable contributions thus far and determine what else you wish to accomplish before the end of the year. Thus, with the approach of the giving season in mind, you can efficiently allocate your resources to guarantee the fulfillment of your philanthropic objectives for the year.
October: Online Security Update
Nothing is more terrifying than cyber-security deception. When contemplation turns to the conclusion of the calendar year, it is prudent to reassess one’s online accounts and passwords. It is imperative to employ robust and distinct passwords for every account, comprising a mixture of uppercase and lowercase letters, numerical digits, and special characters. Consistently changing your passwords can substantially enhance your level of online security.
November: Consider your family
November is the month of the holiday season and family gatherings from far and wide. Due to this emphasis on family, now is an excellent time to attend to critical financial affairs. Wills and trusts are examples of estate documents that should be reviewed and updated. Convey your children’s industrious financial matters in a manner suitable for their age and consolidate all your vital financial documents in a single, easily accessible location. These measures facilitate the organization of the financial matters of your family, thereby offering reassurance throughout the holiday season.
December: Reflection and Prospects
It is a perfect time for those who have not yet retired to contemplate their retirement savings as the year draws to a close. Assess your tax-deferred retirement account contributions from the previous year and determine how much you can contribute in 2025. Even if it is not possible to do so immediately, strive to contribute 15% of your salary (employee contributions included) to retirement accounts.
Presently is the moment to ensure that you have completed the mandatory minimum distributions from a traditional, rollover, SEP, or SIMPLE IRA if you reach the age of 73 in 2024. Regardless of age, examine the provisions of any inherited IRA. Neglecting to accomplish this may result in significant financial loss.
To counterbalance income taxes, you and your financial professional should consider tax loss harvesting for your portfolio. By selling an investment at a loss, this investment strategy attempts to reduce your taxes for the current taxable year.
Maintain financial health throughout the year.
Never forget the significance of maintaining a watchful eye on your finances to accomplish your objectives. Each developmental stage—from establishing unambiguous goals in January to formulating astute retirement decisions in December—contributes significantly to one’s progression toward financial autonomy and stability. Keep track of your progress throughout the year by consulting this checklist, and keep in mind that consistent, modest efforts can yield substantial long-term advantages. Best wishes for a prosperous and economically sound year in 2024!
