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14 Point Checklist for Your Year End Financial Checkup

Don’t miss this financial checklist for your year-end financial checkup to get the New Year started right

Put down the tinsel and turkey stuffing! The end of the year isn’t just for celebrating but is also a great time to make sure you’re on track to meet your financial goals.

Thousands of dollars are lost every year because people forget to check their finances. They miss opportunities to save on taxes and other programs. They lose money by letting time-sensitive accounts expire or by not taking advantage of year-end offers.

The good news is that you can avoid all this and potentially make a few thousand with just a quick look at your finances.

Use the financial checklist and the tips below to give yourself a year-end financial checkup.

year end financial checkup checklist

Year End Financial Checkup Checklist

Year-end Financial Checkup: Check Your Financial Health

Your year-end financial checkup is a good time to make sure you’re on-track with your financial plan. A lot might have changed over the year and you don’t want to get lost on the road to your financial destination.

If your income or spending increased over the year, make sure you still have between three and six months of expenses in an emergency fund. These should be in extremely safe investments like short-term bonds and money market accounts.

If your stocks haven’t moved much, you might not need to rebalance your investments but it’s a good idea to include a review in your year-end financial checkup. We talked about how much you should have in stocks, bonds and other assets in an earlier post on realistic retirement planning.

Step by Step Investing StrategyIf it has been more than five years since you thought about your retirement goals, it might be a good time to revisit how much money you plan on investing in each of the asset classes (stocks, bonds, real estate, etc.) Your need for return and risk tolerance will change as you get closer to retirement.

The worst thing a 50-year old can do is to invest like a 30-year old. Get a detailed investing strategy to fit your retirement goals in Step-by-Step Investing, the first book in our investing series.

In this book, you’ll get every step to putting together a solid investment plan from finding your retirement number to investing in stocks and bonds. An Amazon best seller in the investments category and available on Kindle, paperback and audio.

Using a Year-End Financial Checkup to Lower Your Tax Bill

Tax-loss harvesting is a popular year-end financial strategy but should be used with caution. The idea is that you sell an investment that has lost money, taking the loss against other investment gains to reduce taxes, and invest the money in a similar investment. There are two important considerations to tax-loss harvesting:

  • Don’t just withdraw the money. Constantly withdrawing money from your investments will leave you underfunded when it comes to reaching your goals. Find another investment that is very similar, from the same industry or with similar growth drivers, to reinvest the money.
  • The risk to tax-loss harvesting is that you sell a stock before it rebounds and buy another before it lags. It’s nice to offset some stock gains but the stock in which you reinvest your money has to be closely correlated with the one you sell, i.e. if one goes up then the other will likely increase also.

You’ll need to start planning your taxes now to know how much tax-loss harvesting and deductions you’ll need. I know it’s not what you want to do during the holidays but putting some basic numbers into a tax software program will help you save money next year.

Beat the rush and grab discounts on TurboTax before the New Year. The software makes it easy to estimate your income and expenses and will suggest tax planning steps you can take before year-end.

TurboTax offer: Max refund, guaranteed. File Fed & State for $0. Fed Free Ed.

The Easiest Money You’ll Ever Make on Your Financial Checkup

year end financial checkup checklistContributions to a retirement account are the easiest money you’ll ever earn because of the tax advantages and employer match. With the stock market basically flat for the year, you need every advantage available.

If you can’t max out your contributions, at least meet the maximum for your company’s match.

Contributions to your individual retirement account (IRA) can be made up to the date you file your taxes but contributions to your 401(k) must be made before year-end. Limits for 401k, 403b and most 457 plans increased to $18,000 for 2015 and up to $24,000 for those over 50 years old.

If you’re self-employed, you can contribute up to 25% of your compensation up to a max of $59,000 for the year.

It might make sense to convert your traditional IRA to a Roth IRA before the end of the year. You’ll owe income taxes on the gains but will never have to pay taxes when you withdraw the money in retirement.

A Roth IRA is usually for those planning on a higher tax rate in retirement but nobody really knows what taxes will be in the future. Having some money available tax-free is a great way to plan for all scenarios. Unlike a traditional IRA, you aren’t required to take money out of a Roth IRA when you reach 70 ½ years old

Contributions to a 529 account are due by the end of the year as well and can be another great way to save tax-free. Some states offer additional tax breaks beyond the federal tax deduction and the money can be used for a range of educational expenses.

Year-end Financial Checkup: Make the Decision to Itemize Now

One of the most important year-end financial decisions is Should You Itemize deductions on your taxes filed next year. Everyone gets a standard deduction of $9,250 for head of household or $6,300 for single taxpayers.

If other expenses you paid like mortgage interest, property taxes, medical expenses and charitable donations add up to more than this amount then you should itemize them (use them instead of your standard deduction).

Expenses that can be itemized include:

  • Home mortgage interest and points paid
  • State and local taxes
  • Charitable donations up to 50% of your adjusted gross income (or 30% in some cases)
  • Medical expenses that were not reimbursed and over 10% of your AGI
  • Some work-related expenses that were not reimbursed

These expenses add up to more than the standard deduction for many taxpayers without them even knowing it. If you live in a state with high income taxes and own your home, it’s likely you’ll save more money by itemizing. Look around for receipts and start adding, you might be getting more back on April 15th!

One super tax trick I’ve found is by paying my son to help me on my blogs. You see, the standard deduction for a dependent is only $1,050 but there’s a way to boost this. Dependents can earn up to $6,300 without owing any taxes so if you own a business, even a part-time side business, then you can pay them for helping you.

You get a business deduction and lower your taxes and they won’t have to pay taxes as long as it’s under the allowable amount!

Year end is the deadline for donating to charitable organizations so make sure you make your contributions now. Donating depreciating assets like cars is especially helpful because you might be able to write off more on the contribution than the car is really worth. Donating shares of stock is also a popular year-end financial strategy. You won’t pay gains on the sale of stock and the non-profit gets all the proceeds.

You can also gift up to $14,000 to any number of recipients without owing any taxes on the gift. This doesn’t mean you won’t still pay taxes on the income but it’s a tax-free way of passing down an inheritance without taxes. If you exceed the annual amount, you can gift up to $5 million over your lifetime without owing taxes. After that point, you’ll owe 35% on any excess gifts.

financial checklist year end checkup

Putting together a financial checklist can be easy

Year-end Financial Checkup: Don’t Let those Flex Accounts Lapse

Flexible Spending Accounts (FSA) are a great way to pay for un-reimbursed medical expenses. Your employer takes the money out of your check before taxes to deposit in your account. You have to spend the money by the end of the year though or you may lose it. Some employers may offer a grace period into the New Year but it’s not required.

These are some of the best tax-free investing options you can find and will grow your money for things like healthcare spending and education!

If you’ve still got money in your FSA, there are a number of ways to spend it quick:

  • Get new eye-glasses if your old ones might need replaced
  • Chiropractor and acupuncture visits are allowable expenses
  • Lasik surgery and non-cosmetic dental care is covered
  • Weight loss programs if your doctor deems it medically necessary

If you set up a dependent care FSA and had money come out of your checks for childcare, the services need to be taken before the end of the year as well. Figure out how much you’ve still got to spend from your FSA and plan a few nights out!

If you have already reached your medical insurance deductible for the year, consider getting in some of those procedures you’ve been putting off before the year-end. Waiting until next year will mean you have to out-of-pocket more money until you reach your deductible. Conversely, if you haven’t met your deductible, put off procedures so they apply to next year’s deductible.

Year-end Financial Checkup: Lower Income, Higher Expenses = Lower Taxes

Put a little planning to work in your year-end financial checkup to lower your taxes. You might want to take that bonus after January 1st or ask some clients to pay later to reduce your 2015 taxes. If you’ll have business expenses next year, consider making them before the year-end to deduct the amount from this year’s tax bill.

We generally think of paying less taxes now and taking the hit next year but it can work the other way around as well. If you didn’t make as much this year but are planning on higher income next year, consider trying to hold off on some expenses until next year.

If you use a financial planner or accountant, now is the time to meet with them for your year-end financial checkup. Your accountant might be able to bring up some new loopholes that can save you money at tax time but it’s not difficult to manage your own finances. Follow the financial checklist above and take control of your own financial destination.

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