Year-end financial checklist—10 smart ways to bring 2013 to a close
With the holidays upon us, it’s easy to put money on the back burner. However, this can be a great time to get your finances whipped into shape. Use this year-end financial checklist to ring in the new year with confidence. It shouldn’t take a lot of time—and it may make your holidays that much brighter.
1. Review your 2013 spending patterns. Did you stick to your budget? Were there a lot of unanticipated expenses? Did you meet your savings goals? With this year’s facts and figures in front of you, it will be easier to plan your expenses for next year.
2. Determine your net worth. This worthwhile yearly exercise is easy to do. Simply add up what you own (home, car, savings, business interests, personal property, investments, etc.) and subtract what you owe (mortgage, loans, credit cards, etc.). This information will help you track your progress year to year—and can be an incentive to save more or reduce debt.
3. Rethink your credit card usage. Speaking of debt reduction, review the terms of your credit cards. Are you paying too much in interest and fees? Are you getting the cash back or travel benefits you want? If you’re going to use credit cards, you might as well make them work for you—but pay off your monthly balance if you can!
4. Check your credit score. While you’re focusing on credit cards, go to annualcreditreport.com and request a free credit report from each of the three nationwide credit reporting agencies. You’re entitled to one free report from each agency every 12 months.
5. Make sure you’re on track for retirement. If you’ve let saving for retirement slip, recommit to making it a priority. Up the percentage you’re contributing to a 401(k) or IRA. Self-employed? Consider opening a SEP IRA or another small-business retirement plan.
6. Comparison shop for insurance. Insurance needs change as your life changes. Review your health, homeowners, and car insurance policies to make sure you have the right coverage at a reasonable premium. Consider life insurance if you have dependents—or consider discontinuing a policy if your kids are on their own.
7. Review your portfolio. Now’s the time to give your portfolio its annual check-up. Does your percentage of stocks versus fixed income and cash still reflect your goals and feelings about risk? Is your money spread out among enough different types of investments? Are you paying too much in fees? For retirees, this is also a good time to set aside cash for next year.
8. Start tax planning. Tax time is just around the corner. When selling stocks to rebalance your portfolio, considering harvesting your losses to get a tax break. You can use capital losses to offset taxable capital gains, plus up to $3,000 in ordinary income ($1,500 for married couples filing separately). Losses you can’t use this year can be carried over into future tax years.
9. Update your estate plan. New baby? Newly married or divorced? Be sure to update your beneficiary designations. If you haven’t already, complete an advance healthcare directive and give copies to your doctor and hospital. Don’t have an estate plan? Make that a new year’s resolution!
10. Put whatever you can on automatic. Bills, recurring payments, even savings—the more you can put on auto pay now, the easier your financial life will be next year.
If your year-end review shows you’ve got things under control, congratulations. If you need to make changes, start putting together your plan for 2014. Either way, with this information in hand, you’ll feel in greater financial control—which should help you enjoy the holidays even more!
This column is no substitute for an individualized recommendation, tax, legal or personalized investment advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager. COPYRIGHT 2013 CHARLES SCHWAB & CO., INC. MEMBER SIPC. (1213-8604)