Year End Financial Planning

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One benefit that comes with the passing of another year, is the opportunity to evaluate what is working and what isn’t working so well when it comes to your personal finance. With a bit of reflection, organization, and goal setting you can anticipate even better financial decisions and a year of growth and opportunity. Because the best financial decisions are usually made with the benefit of time, there are things you can do now to help you prepare to minimize expenses, organize tax and financial records, and create the flexibility needed to make the best long term financial decisions.

Organize Your Tax Records Early

In preparing for the upcoming year’s tax filing, you should begin to organize your financial records. Finding the right system for you to keep track of your important documents will get you ready to file at your convenience (meeting Uncle Sam’s deadline, of course).

Your tax records may include: year end investment statements, capital gains and losses from asset sales, financial records from real estate transactions, interest and dividend records for the year (1099s), payroll and withholding statements (W-2s), records corresponding with deductible expenses such as property taxes and insurance, mortgage interest, business income and expense records, charitable donations, etc. Take a few minutes to find a place to store all these important documents at the beginning of the year.

Store Your Documents

Often with a new year, comes the goal to organize and take some control of your most important documents. Taking a few hours to gather and organize all these records and finding a secure place for storage can save you a lot of grief in the event of an emergency.

All your difficult to replace legal and financial documents should be stored in a safe and fireproof location. Consider renting a safe-deposit box at your local bank or credit union, or purchase a fireproof lockbox from your local office supplies outlet. Documents you should store include wills, trusts, powers of attorney, titles of ownership (your home, cars, etc.), medical information, Social Security cards, birth certificates, and interior and exterior house photos (in case of fire or theft). Also, it never hurts to tuck some emergency cash away in a protected location.

Review Your Insurance Coverages

At least once each year you should gather your insurance records together and review the adequacy of your coverages and compare rates with other providers. This is especially important to do as the needs of your family and your financial situation changes. For example, if you have a private term life insurance policy that is due to expire, you will need to evaluate options of extending the policy, or begin a search for another policy that will best meet your changing needs.

Review your auto insurance, and determine if adjusting your coverage through a different policy or different company might work better for your family. Your current auto insurance policy does not have to expire before you change your coverage.  Remember that a change of age in the drivers, the type of vehicle they drive, their driving record, and even the grades they receive can lower your premium with some insurers. The start of the year is also a good time to re-evaluate renter’s insurance (if applicable), homeowner’s insurance, PMI (mortgage insurance), and disability insurance, to see if any changes are needed.

Review Your Estate Plans

If you already have an estate plan in place, take some time to ask yourself some difficult but necessary questions.

  • Does your will still reflect your personal wishes for the distribution of your assets?
  • Have the personal or financial circumstances or those of your beneficiaries significantly changed over the past year?
  • Have you considered a gifting program to move assets from your estate to those you wish to enrich?
  • Have you reviewed your estate plan in light of changing estate tax laws or changes in your personal financial position?

Taking time to address these questions will begin the process of updating your plans to reflect your goals. While financial advice for retirement planning is important, you will also need professional help with estate planning. If you do need to make changes the guidance of your attorney, accountant, or other trusted advisors can help you make the changes that will be in your best interest.

If you haven’t started estate planning, now is the time to do it. Estate planning is not just for the wealthy or the retired. Basically, if you own something, you have an estate (think car(s), money in the bank, furniture, or any other personal possessions).  If  you have children, you have a moral obligation to make decisions regarding their care if anything were to happen to you, and to make decisions about your care if you were to become disabled. Asking the difficult questions now and coming up with a plan will create a foundation that you can build on and adjust as you go through life.

Minimize Your Tax Liability

Don’t neglect the opportunity to review your payroll withholdings and taxes on a yearly basis.  With changes in the tax code, it is always important to estimate your federal and state income tax liabilities periodically to ensure proper withholding levels and quarterly estimated tax payments. This will prove especially important if you have sold significant assets during the year or have experienced large swings in your income. The end of the year is a good time to ask yourself how much taxes do I pay from my paycheck? If you received a large tax refund you may want to adjust your payroll withholdings and put that excess money to work for you. Or, depending on fluctuations in your business, may need to calculate how much money should be budgeted for taxes if self employed.

Also, you may want to consider consulting with your accountant for advice on maximizing your deductible expenses and savings such as qualified retirement plans, charitable giving, deductible expenses, etc. to offset your tax liability.  Be careful to meet all IRS dates and deadlines for withholdings and filings.

Improve Your Balance Sheet

With an approaching new year, comes a fresh set of goals to save more money and get out of debt, but with any goal you must have a plan. Ask yourself these three questions: Am I saving enough for retirement?  When will I be financially able to retire?  Am I taking full advantage of my tax-deductible employer sponsored retirement plan and individual tax-advantaged saving plans? If you haven’t, then start now. Find ways to cut back on everyday expenses or add to your cash flow with part time work to squeeze retirement savings into your budget. Don’t stop there with your savings.  Work on setting aside a personal savings and a 3-6 month emergency savings.

Keep a close eye on the other side of your balance sheet, the liabilities side, and make sure you have a handle on things. By the the way, a good handle, does not mean paying the minimum payment on your credit card each month.  Take an honest look at your spending and your liabilities.  Every effort should be made to eliminate your debt. Start working on a debt snowball plan and attack each debt with a detailed plan and great intensity. You can get help to restructure your debt and wipe it out quickly with our credit card debt payoff calculator. With enough desire and a workable plan, this could be the year you work to see your goals come to fruition!


Simplifying your financial holdings can eliminate much of the drudgery of financial record keeping. If you have credit cards you do not use, cancel them and eliminate the extra statements. Consider consolidating your credit lines to the greatest extent possible. Review your investment holdings for non-performing assets or redundant accounts and consolidate your investments. The more you can simplify your personal finance, the more time you will have investing your time with those that matter most.  A little organizing, goal setting, and planning can go a long way in making that happen!