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  • Writer's pictureMike Bink

Year-end financial checklist

As the year wraps up, it’s natural to think about your goals — professionally, personally, and financially. It’s something that you and your household will want to assess and talk about openly and honestly. Whatever the case, you want to head into the new year with some new financial goals. However, before you flip the calendar to a new year, here are some things to make sure and check off your to-do list before saying goodbye to this year. Doing so will help ease your mind and allow you to focus on the year ahead.

Review or update your beneficiary designations

Make any needed updates to the beneficiary portion of your bank accounts, retirement accounts, life insurance policies, and annuities. Have you gotten married or had a child within the last 12 months? Or perhaps a loved one has exited your life through a divorce or a death. Choosing a beneficiary for your life insurance policy is a decision you should consider carefully. This is important because beneficiaries trump who’s named in a will.

To help you keep track of your beneficiaries, write down their names along with the date when any updates were made. Also, be sure to name a contingent beneficiary in case your primary beneficiary passes away. Store this document in an easy-to-access spot and review it annually. Don’t forget to name a beneficiary on your IRA 401(k), IRA, Roth IRA, life insurance, annuity, and other retirement accounts so that it doesn’t have to go through probate via your estate, which is costly and time-consuming.

Review tax withholdings

Review your tax withholdings and payments. Big events in the last year — such as marriage, divorce, or having a child — are good reasons to adjust your withholding. Keep in mind that American society experienced a lot of big events in the last couple years that might affect how much you should withhold. Did you qualify for coronavirus tax relief or a special tax law provision in light of a major disaster in your area? Or did you receive unemployment compensation or experience a job loss? Have you pivoted from being an employee to working in the gig economy due to the pandemic? Check out the Tax Withholding Estimator from the IRS. It’s a handy tool for everyone — employees, retirees, and the self-employed — who wants to effectively tailor how much income tax to withhold.

Review your insurance needs

Health insurance, life insurance, homeowners insurance and auto insurance — oh my! The types of insurance you can have seem endless. It’s important to reevaluate your insurance policies regularly — to make sure you’re properly insured and are not paying too much for them.

Reviewing homeowners insurance Homeowners insurance rates can fluctuate due to many factors. Insurance premiums will be affected by the 18 weather/climate disaster events in 2021 in the United States that each exceeded $1 billion in damages. Thankfully, there are things you can do to help decrease the cost of your premium. For example, increasing your deductible from $500 to $1,000 may help you save 25 percent in premium costs. Looking for other practical ways to lower your premium? Bundle your homeowners and auto coverage, which could save you up to 30 percent total. Also, have you accumulated more possessions since the time you purchased your policy? If so, reevaluate your homeowners policy to be sure it covers everything of value.

Reviewing auto insurance Every state has minimum car insurance requirements — and you might need just the minimum coverage. However, make sure your coverage equals your total assets (your house, car, savings and investments) in case the costs related to the accident exceed your coverage limits — and your assets are seized to pay for them. Your auto insurance might include liability coverage, bodily injury liability (BIL), property damage liability, personal injury protection, uninsured/underinsured motorist coverage, collision, and comprehensive. Review the types of coverage your state requires and read up on potential rates and discounts or work with a professional to get an affordable rate.

Review your portfolio — diversify if need be

Take a close look at your investments. We saw how quickly the world changed when the pandemic began. So, too, can your life situation. Make sure your financial plan still fits you. Did you just inherit some money? Or perhaps your job is less secure than it was last year. Are you required to begin taking RMD's (Required Minimum Distributions) this year? As your life changes, your investments and financial portfolio might need another review and alterations. Meet with your financial professional to see how changes in your life may have impacted your overall financial portfolio.

Spend eligible flex dollars

A healthcare flexible spending account (FSA) can save you money — as long as you spend the pre-tax dollars before the end of the year. Otherwise you run the risk of losing it (unless your employer offers a 2.5-month grace period or allows you to carry over $550 into the next year). In 2021, employees could squirrel away as much as $2,750. (Unless your employer limited the contribution to less than that amount.) So, make that last-minute dental or acupuncture appointment while there’s still time. A tip for next year’s open enrollment period: If you, your spouse or your child is going to need medical services, you should consider contributing to your FSA at least the amount of your health insurance deductible.

Check in on your emergency savings account

In an ideal world, you’d have three to six months’ worth of emergency savings set aside. However, we know it can be hard to live in an ideal world during a pandemic, which is making it more difficult for some heads of households to care for their family’s everyday needs. However, it’s important that you don’t fall into the camp of the 25 percent of Americans who don’t have any emergency savings. And just 1 in 4 Americans have the cash for a $1,000 emergency expense. Remember that an unexpected emergency, such as a car repair or a medical expense, could set you back financially. To help ensure that doesn’t happen, build up your savings by automatically depositing some money from your paycheck to a dedicated savings account.

If you have kids, contribute to their college fund

College tuition isn’t for the faint of heart. But having a strategy in place can help you prepare for the rising costs. If you already have a vehicle you're using to save for college, try to contribute as much as you can. As you’re preparing your child (or children) for his or her upcoming education, whether it’s elementary, high school or college, there are many different types of vehicles that could help you reach your goals. To explore the possibilities and to see what would be a good fit for your specific situation, schedule a call to talk to our team today.

Make charitable donations

Donate to an organization that’s close to your heart. The benefits are two-fold: You will reduce your taxable income and feel good about giving some of your hard-earned dollars to a good cause. It’s a win-win.

Final Thoughts - Start planning for the future

The new year starts as quickly as the last one ends. So be sure to set some new goals and write them down. Do you want to create an estate plan or simply save some money for your teen’s braces? Or you might be expecting some big changes that will affect your finances — such as having a baby or changing your career. Create goals surrounding these anticipated changes, so you can develop a plan to accomplish them. If you would like help developing a comprehensive plan to achieve all of your financial goals, schedule a call with our team today!



Mike Bink, AAMS®, CCFS®

Mike is the founder & president of Equivest Financial Advisors. He is a husband, father of 3, and a fiduciary advisor who is passionate about helping his clients take control of their retirement and reach their financial goals. Learn more about Mike.

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