You do not necessarily need to hire a financial advisor to complete a year-end financial checklist. Still, it can be helpful to work with a professional who can guide and advise you. However, if you prefer to complete the checklist on your own, many online resources and tools are available to help you get started.
What is the Annual Financial Planning Checklist?
Sometimes it feels like a year can pass by within a moment. But when you look back over the year, you might get surprised to see many things have changed. Like other things in life, your finances also change over time. So, before buying a new calendar for the new year, there are some things to mark on your financial to-do list.
Creating a financial checklist and keeping track of your progress makes it simpler to assess which goals you have successfully achieved and which you still need to work on. In this guide, you will find how to create your financial checklist and why is it important to have one.
What is a Financial Checklist?
A financial checklist determines where you stand financially and how you have dealt with your finances in the last twelve months. This means considering things like how much you have saved, your monthly salary, how much is in your retirement fund, what debts you are carrying, etc. This also includes utility bills, rent and other monthly expenses.
This checklist will help determine your goals and what you need to do to get there. That is why the end of the year is a good time to review your accounts, investments and make new goals for the upcoming year.
2023 Year-End Financial Checklist
Now that you know what a year-end financial planning checklist is, let us list the most crucial points you need to check off of your checklist before a new year.
- Review Your Financial Plan: The most important part of the checklist is reviewing your financial plan. Think about how much you have spent this year and on which things you have spent it. Ask yourself if you could fulfil your resolutions for this year and, if not, how long it will take to achieve them. Also, consider what changed in your life this year. If you face money difficulties throughout the year, year-end can be a good time to adjust your priorities and expenses.
- Conduct a Tax-review: If you are a taxpayer, it is good to get prepared for how much tax you will need to pay in the upcoming year. Especially if you experienced life transitions like childbirth, divorce, death of a loved one, or retirement in the past year, it could affect your tax withholding status. These are some reasons you should review your tax withholdings and adjust them.
- Assess Your Investments: Investors must check where their investments stand while assessing the financial checklist. Though investing is a long-term activity, looking at whether your allocations still meet your needs should be done annually. Your portfolio might get unbalanced if your asset allocation has shifted during the year and any of your assets are underperforming or overperforming. Figure out which investments will help you to meet your asset allocation goals.
- Rebalance Your Portfolio: Rebalancing your portfolio annually ensures that you are not wasting your investment money on securities that are not generating any good returns or you are not carrying much risk. It also ensures that your current portfolio matches your investment strategy. Sometimes you need to make corrections in your portfolio, as the money market fluctuation abrupts the diversification you originally planned.
- Review Your Debts: As the year ends, it is the perfect time to review your debts as part of your annual financial planning checklist. Take a moment to gather all your bills and statements to assess your current debt situation. This review will help to better understand your overall financial health and help you make more informed decisions moving forward. Consider prioritising your debts and focusing on paying off high-interest balances first.
- Take a Look at Your Emergency Funds: During assessing your last year's financial status, one critical area to consider is your emergency fund. It's essential to have money set aside for unexpected expenses, like medical emergencies, sudden need for car repair, etc. Take a look at your emergency fund and ensure that you have enough money to cover at least three to six months of essential living expenses. If you still need to start an emergency fund, now is the perfect time.
- Review Your Insurances: In your financial checklist, reviewing your insurance and ensuring you have adequate coverage in case of unexpected events is a good idea. Start by reviewing your health insurance policy to ensure it meets your needs and covers any new medications or treatments you may require. Consequently, look at your car insurance policy and ensure your coverage levels are appropriate for your driving habits and vehicle.
- Create an Estate Planning: Creating an estate plan may not be interesting, but it is critical. By putting a plan in place, you can ensure that your assets are distributed according to your wish and that your loved ones are cared for after you are gone.
Therefore you can start by taking inventory of all your assets, including bank accounts, investments, and property. Then decide who you want to inherit your assets and how you want them to be distributed.
Completing a financial checklist can help you stay organised and financially prepared for the upcoming year. Whether you're looking to save more, invest wisely, or simply stay on top of your finances, a year-end financial checklist is a great place to start. So, take the necessary steps now to ensure a brighter financial future ahead.
FAQs About Year-End Financial Checklist
The time it takes to complete a financial checklist depends on the complexity of an individual's financial situation. However, most people should plan to spend several hours reviewing their finances and completing necessary tasks.
If you discover errors in your credit report during your year-end financial checklist, you should immediately dispute the errors with the credit bureau. You can also contact the creditor that reported the incorrect information to request a correction.
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