Wrapping Up Your Finances: A Comprehensive Year-End Guide

As 2024 draws to a close, it’s the perfect time to take stock of your financial situation and focus on wrapping up your finances in preparation for the year ahead. This comprehensive guide to year-end financial planning will walk you through essential financial tasks to complete before the year ends, ensuring you start the new year on solid financial footing.

1. Review Your Budget
   The first step in your year-end financial planning should be thoroughly reviewing your budget.
   • • Analyze Your Spending: Look back at your expenses over the past year. Are there areas where you consistently overspent? Identify potential areas for improvement.
     • Adjust for Changes: Consider any life changes that occurred this year or are expected in the coming year (e.g., job changes, new family members, relocations). How will these impact your budget?
     • Set New Goals: Based on your analysis, set realistic financial goals for the upcoming year. These could include increasing savings, paying down debt, or saving for a major purchase.
2. Maximize Retirement Contributions
   Year-end is a crucial time to focus on your retirement savings.
   • 401(k) Contributions: If possible, max out your 401(k) contributions. The contribution limit for employees who participate in 401(k), 403(b), and most 457 plans, as well as the federal government’s Thrift Savings Plan, has been increased to $23,000, up from $22,500. Starting in 2024, the federal government’s Thrift Savings Plan for 50 and older can contribute up to $30,500. The catch-up contribution limit for employees 50 and over participating in SIMPLE plans remains $3,500 for 2024.
   • IRA Contributions: Consider maximizing your IRA contributions. The limit for 2024 is $7000 for those under 50, and $8000 for those 50 and older.
   • Catch-Up Contributions: If you’re 50 or older, remember catch-up contributions for both 401(k)s and IRAs.
3. Tax Loss Harvesting
   Take advantage of tax loss harvesting to optimize your investment portfolio. 
   
   1. Review Your Investments: Identify any underperforming investments you want to sell.
   2. Offset Capital Gains: Use losses to offset capital gains, potentially reducing your tax liability.
   3. Carryover Losses: Remember that excess losses can be carried over to future tax years.
4. Review and Update Insurance Policies
   Ensure your insurance coverage is adequate and up-to-date.
   • Health Insurance: Review your health insurance plan and make any necessary changes during open enrollment.
   • Life Insurance: Assess whether your life insurance coverage is sufficient, especially if you’ve had major life changes.
   • Property Insurance: Review your homeowners’ or renters’ insurance to ensure it adequately covers your belongings.
5. Check Your Credit Report
   Monitor your credit health to start the new year on the right foot.
   • Review for Errors: Check your credit report for any errors or discrepancies.
   • Dispute Inaccuracies: If you find any errors, dispute them with the credit bureaus.
   • Monitor Your Score: Keep track of your credit score and take steps to improve it if necessary.
6. Make Charitable Contributions
   Consider making charitable donations before the year ends.
   • Tax Benefits: Charitable contributions can provide tax benefits if you itemize deductions.
   • Evaluate Charities: Research charities to ensure your donations to reputable organizations.
   • Consider Donor-Advised Funds: These can be a tax-efficient way to make charitable contributions.
7. Use Flexible Spending Account (FSA) Funds
   If you have an FSA, use the funds before they expire.
   • Check Your Balance: Review how much you have left in your FSA.
   • Eligible Expenses: Familiarize yourself with eligible expenses and make necessary purchases.
   • Plan for Next Year: Adjust your FSA contributions for the coming year based on your spending this year.
8. Review and Rebalance Your Investment Portfolio
   “Ensure your investment strategy aligns with your goals and risk tolerance,” saysMichael Norton, Senior Vice President Investments, David Lerner Associates. “You should regularly check if your current investment choices still match what you want to achieve financially and how much risk you’re willing to take. Rebalancing helps adjust your portfolio to remain on track, even as market conditions or your circumstances change.”
   • Asset Allocation: Check if your current asset allocation matches your investment strategy.
   • Rebalance if Necessary: Sell some of your best-performing assets and buy more of your underperforming ones to maintain your target allocation.
   • Consider Your Risk Tolerance: Assess whether your risk tolerance has changed and adjust your portfolio accordingly.
9. Plan for Major Purchases or Life Events
   Think ahead to any significant financial events in the coming year.
   • Major Purchases: If you’re planning a major purchase (e.g., a home or car), start preparing now.
   • Life Events: Consider the financial implications of expected life events (e.g., weddings, having a child).
   • Emergency Fund: Ensure your emergency fund is adequate for potential unexpected expenses.
10. Set Financial Goals for the New Year
    Finally, set clear, achievable financial goals for the upcoming year.
    • Be Specific: Set specific, measurable goals (e.g., “Save $5,000 for a down payment”).
    • Prioritize: Determine which financial goals are most important to you.
    • Create an Action Plan: Develop a concrete plan to achieve each of your goals.

    By completing these year-end financial tasks, you’ll be well-prepared to start the new year on a strong financial footing. Remember, financial planning is an ongoing process. Regular check-ins throughout the year can help you stay on track and adjust your plans as needed. Here’s to a prosperous and financially secure new year!

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.