Blog Misc 6 Tips for A Year-end Financial Planning Checklist 2021

6 Tips for A Year-end Financial Planning Checklist 2021

date September 27, 2021 time 5 min read 269 views

2021 is a challenging and unforgettable year that we have faced the impact of the coronavirus pandemic. While you can not predict what may happen in the future, a financial review checklist is one of the most vital tools you should have. Take your time to list out what you did with your wallet and which investments performed the best. It can help you set yourself up for financial goals in 2022.

For the financially savvy familiar with a year-end financial planning checklist and Christmas saving plans, it shouldn’t take you too long to run through that—so let’s get started!

Review your spending

When it comes to a year-end financial planning checklist, the priority is reviewing your cash flow. This can help you determine how much money flows in and out so that you can make a few adjustments if needed. It is also time for a budget update to track your spending going forward. 

Keeping track of your spending is essential to financial stability.
Keeping track of your spending is essential to financial stability. (Source: Pixabay)

You can start by determining all sources of current income and tracking your expenses monthly and annually. Additionally, it takes a few minutes to answer the following questions: Did your net worth increase? Which investments performed the best? Most importantly, how does it all tie into your master plan for the future? 

You also need to evaluate trends or expected changes to current income and expenses. Don’t forget to identify any significant expenses planned for the next year, such as buying health insurance or a new house. All information can help you develop a spending plan around your goals that motivates you to achieve in the next year.

Review your savings plan and set goals for 2022

The end of the year is a great time to review the goals you made and set new ones for the coming year. What did you do this year? Is there anything you are proud of accomplishing? Was there anything you wish you could have done better? When looking back on any obstacles this year, you can figure out how to use them as stepping-stones to start compound interest investments and get your financial goals back on track. 

It can be beneficial to reflect on your financial health by reviewing the past few months or years. Ask yourself critical questions like: Did you pay off the debt you needed to or hit your target? If you lost track of your savings plan or had to dip into your emergency fund, set a new target for 2022. 

In an ideal world, you should have three to six months’ worth of emergency savings set aside. If you have several short-term savings goals, such as saving for a down payment on a house or car, or taking a nice vacation, set the monthly goal and build it into your budget with irregular income

Planning for your retirement

Topping off your retirement is one of the top priorities you need to consider in a year-end financial planning checklist. Planning for your retirement could be simpler than you might expect once you figure out exactly the amount you need to sustain your lifestyle during retirement. Also, you should evaluate your investment strategy to reach your retirement objective.

A comfortable retirement is within your reach with robust financial planning.
A comfortable retirement is within your reach with robust financial planning.

If you participate in a 401(k) or IRA plan, be sure to look out for is the ever-changing 401k 2022 contribution limit IRS, contribute enough to take full advantage of available tax deductions and your employer’s matching contribution. Otherwise, a Roth conversion may be an ideal option for you to diversify taxes for your retirement income. Tax-free income from a Roth IRA can protect you against future tax rate increases, the Social Security tax on excess earnings, as well as having to make unneeded withdrawals due to the required minimum distribution rule.

Review your insurance coverage

Any changes to your financial circumstances such as home or car purchase, surgery, or other life events warrant a review of your insurance coverage. By checking your home, auto, and life insurance policies, determine whether you have enough coverage or if deductibles need to be adjusted. For instance, review your savings accounts contribution to make sure all is in your control.

Climate change is just on of many reasons why having insurance coverage can be invaluable
Climate change is just on of many reasons why having insurance coverage can be invaluable. (Source: Pixabay)

Your renters or homeowners insurance should cover any additional big purchases you made during the year. For example, a healthy housing market pushed prices up this year in many parts of the country. If your homeowner’s insurance coverage is based on a house valued at $500,000, and it is now worth more than $550,000, your coverage may be deficient. 

Tax planning

Revisiting tax planning is an effective tip for your year-end financial planning checklist. Taking advantage of the numerous taxes can offer you to implement and incorporate into your overall financial portfolio. 

You can start by identifying any actions to reduce taxes and evaluate and maximize 401(k), IRA, or other retirement plan contributions and the differences between 401(k) and 403(b). Also, monitor tax loss carry-forwards and consider harvesting losses to offset gains. You can also consider a Qualified Charitable Distribution (QCD) from your IRA – up to $100,000. 

If your income was unusually low in 2021, consider ways like Roth IRA conversion to accelerate future income to utilize losses. In contrast, accelerating tax deductions can help you offset income and reduce taxes. Making charitable contributions such as direct gifts, indirect gifts, and split-interest gifts could be a great way.

Review Your Investment Goals

You have been through a volatile year, so your year-end financial planning checklist should include a review of your investments. While considering investment trends in 2022, you could evaluate your current investments compared to your financial goals. Then, according to your changing risk tolerance and how the market has moved, rebalance your portfolio, including your 401(k).

Your portfolio should reflect investment objectives appropriate for your current life stage about your age, risk tolerance, tax status, etc. Hence, meeting your financial professional to review your year-end financial planning checklist may have positively impacted your overall financial portfolio.

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George Schooling

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