Everyone knows that Santa’s busy making his list and checking it twice. But what type of list is he creating, you might wonder?
It’s an essential end-of-year financial checklist, of course.
With Christmas and Hanukkah fast approaching and less than a month until the New Year, now is the perfect time to conduct a thorough financial checkup before 2025 begins. Many of the tasks involve proactive planning to prevent last-minute scrambling or worrying about things you should have already addressed, says Alanna Morey, a private wealth advisor with Ameriprise Financial. Your aim should be to have “no surprises in 2025,” she emphasizes.
Investing the effort now to organize your financial situation will pay off in the long run. Keeping this in mind, here’s a comprehensive end-of-year financial checklist for 2024.
Evaluate Your Budget and Spending Habits
According to Jaime Eckels, a partner at Plante Moran Financial Advisors, December presents an excellent opportunity to reflect on the past year and assess whether you remained on track with your financial goals.
You should carefully review your credit card statements and ask yourself critical questions: How did your financial plans hold up? Were you able to adhere to your budget? Did you overspend on luxuries like espresso martinis or attending the Eras Tour, sacrificing your short-term savings for a new iPhone?
“We often discuss the importance of budgeting, but it only proves effective if you take the time to reflect and see how your actual spending aligned with your goals,” Eckels points out.
From these insights, you can adjust your financial strategy for 2025. For example, if you struggled to follow the recommended 50-30-20 budgeting rule in 2024, consider refining those percentages. If rising home and auto insurance costs are impacting your budget, it may be time to shop around for more competitive rates.
Maximize Your Retirement Contributions
Next, Morey recommends assessing your retirement savings strategy. If you have an Individual Retirement Account (IRA), there’s still an opportunity to maximize your contributions for 2024: the deadline for IRA contributions is April 15, 2025. You can contribute up to $7,000 ($8,000 if you’re 50 or older) to your traditional and Roth IRAs, though it’s essential to be aware of IRS income limitations.
Additionally, you can contribute as much as $23,000 to your 401(k) for 2024 (with an additional catch-up contribution of $7,500 for those aged 50 and above). Generally, these contributions must be arranged through your employer, but it’s not too late to reach out to your payroll department and request to increase your contributions from your remaining paychecks. Remember, 401(k) contributions must be completed by December 31.
Meet Important Year-End Financial Deadlines
New Year’s Eve isn’t solely about celebrating with champagne and figuring out how to write “2025” for the first time. It’s also the critical deadline for older Americans to make Required Minimum Distributions (RMDs) from their retirement accounts. (Be aware that the regulations surrounding these distributions have changed due to the SECURE 2.0 Act, so stay informed.)
Moreover, December 31 is typically the last day to utilize funds in your Flexible Spending Account (FSA), although some plans may have different deadlines. This money follows a use-it-or-lose-it policy. Fortunately, there are numerous ways to spend it: FSA-eligible items include sunscreen, vitamins, tampons, contact lenses, acupuncture sessions, travel pillows, and much more.
Assess Your Investment Portfolio Strategy
Morey suggests discussing with your financial advisor whether your investment portfolio still aligns with your long-term goals. A good starting point is to evaluate your comfort level with your current asset allocation, which refers to how your investments are distributed among stocks, bonds, and cash based on your risk tolerance, investment timeline, and financial objectives.
Generally, younger investors can afford to take on more risk with their investment strategies. As you age, you may want to shift towards a more conservative approach with less exposure to stocks and more focus on safer investments.
This time of year is also an excellent opportunity, according to Eckels, to review your brokerage accounts and identify any potential tax-loss harvesting opportunities that could benefit your overall financial situation.
Revise Your Estate Planning Documents
While contemplating festive decorations and enjoying holiday music, it’s crucial to address estate planning, which may not be the most enjoyable topic but is essential. Eckels emphasizes the importance of having a clear “crisis plan.” While you can create a basic will using online services like LegalZoom, consulting an estate attorney is often the wiser choice. They can assist you in crafting a comprehensive set of end-of-life documents, including medical and financial powers of attorney.
If you already have an estate plan in place, don’t assume you’re finished. It’s vital to review and update your documents regularly, as Eckels advises.
“Are your provisions still relevant? Are the individuals designated ten years ago still the right choices for making your financial and healthcare decisions?” she prompts. “Life circumstances change, families evolve, and often we forget to revisit these important documents.”
Celebrate Your Financial Achievements
Finally, Morey stresses the importance of taking a moment to celebrate your accomplishments. Yes, it’s vital! Amid the chaos of holiday preparations and the completion of your financial checklist, don’t forget to acknowledge all the financial goals you’ve achieved in 2024.
This could range from receiving a salary increase, purchasing a new home, taking a long-awaited trip, or using credit card rewards for travel expenses—whatever milestones motivate you moving forward.
“Give yourself credit for your hard work,” she suggests. “Acknowledge the effort you’ve put in, and then set your sights on what you want to achieve in the coming year.”
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