Ten Year End Money Moves to Start Next Year Strong

Some Top Personal Finance Tips to Close this Year and Kickstart the New Year

As the year comes to an end, we start celebrating the holidays. We get together with friends and family for food, fun and togetherness. However, at the year’s end it can be a good time to review our finances and see how things have been going with your money. It’s also a wonderful time get ready for a strong start to the coming new year.

There can be a lot that goes into personal finance. It isn’t just about saving money. It’s also about planning, setting goals, and making smart decisions that will help you in the long run. Whether we want to save more, pay off debt, or invest in the future, here are some top financial moves to make as the year ends—and how to help set us up for success in the new year.

1. Review Your Financial Goals

The end of the year is a perfect time to check in and see how we’ve done with our financial goals. How is our earning going? Did you get a wage increase or earn bonuses or commissions this year? What are we doing with it? Did we save as much as we planned? Or maybe we used it to pay down debt. Did we continue to invest wisely? 

Here are some action steps to help you out:

• Track Your Progress: Compare your actual financial performance against your goals for savings, paying down debt, and investments. Were you saving for that vacation, that music festival or pointy guitar? Let’s track our progress to get there!
• Adjust Your Goals: If you didn’t do as well as you hoped, figure out what went wrong and change your goals for next year. If you did better than you thought, think about how you can make them even better. It’s totally okay to modify or adjust our goals along the way as well.
• Set SMART Goals: For the new year, try and make our goals realistic. It helps by using SMART goals. By making our financial goals Specific, Measurable, Achievable, Relevant, and Time-bound (SMART) it helps us achieve them.

2. Maximize Tax-Advantaged Contributions

As the year wraps up, it can be our last chance to make the most of those tax-advantaged accounts like 401(k)s, IRAs, and Health Savings Accounts (HSAs). These contributions can lower your taxable income as well as help you build a solid retirement nest egg.

Here are some action steps to help you out:

• 401(k) Contributions: Make sure you’re contributing enough to get the full employer match. For 2024, the contribution limit is $23,000, with an extra $7,500 catch-up contribution for those over 50.
• IRA Contributions: Think about maxing out your IRA contributions ($6,500 for 2024, or $7,500 for those over 50). Traditional IRAs might also be tax-deductible.
• HSA Contributions: If you’re part of a high-deductible health plan, make the most of your HSA contributions ($3,850 for individuals and $7,750 for families in 2024). HSAs offer a triple tax advantage: contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are also tax-free.

3. Conduct a Year-End Budget Review

Now, let’s talk about budgeting. Take a close look at your spending for the year and see where your money went. This will help you make better financial decisions in the future.

Here are some steps to help you out:

• Analyze Spending Habits: Wether you are using paper and pen or online tools, apps like YNAB, or spreadsheets like Excel try and review and your expenses for the year.
• Identify Savings Opportunities: Look for areas where you overspent and places where you can cut costs next year. For example, if eating out was a big expense (this was mine!) try meal planning to save money.
• Refine Your Budget: Make a budget for the new year that matches your financial goals and priorities.

4. Tackle Debt Strategically

If debt has been weighing you down or causing some stress, the end of the year can be the perfect time to get serious about paying it off. Paying off debt is one of the best ways to free up cash, increase your net worth, build wealth and improve your financial health.

Here are some steps to help you out:

• Focus on High-Interest Debt: Prioritize paying off credit card balances and other high-interest loans using the avalanche method (tackling the highest-interest debt first) or the snowball method (paying off the smallest balances first for psychological wins).
• Consolidate Debt: Think about combining high-interest debt into a lower-interest personal loan or balance transfer credit card.
• Set a Debt Payoff Plan: Make a clear repayment plan for the new year, including specific monthly payment targets.

5. Review Your Investment Portfolio

Year-end is also a great time to check in on your investment and retirement accounts and make sure your portfolio is still on track with your over all financial goals and risk tolerance.

Here are some steps to help you out:

• Rebalance Your Portfolio: Over time, market changes can cause your portfolio to drift from its original mix of stocks, bonds, and other assets. Rebalancing brings it back to where it should be.
• Tax-Loss Harvesting: If you have investments that lost value, consider selling them to offset capital gains from other investments. This can help you reduce your taxable income. Please discuss with your investment, tax, or finance professional to dig into this.
• Diversify Your Portfolio: Spread your investments around to reduce risk. You know what they say, “Don’t put all your eggs in one basket!”

6. Plan for Tax Season

Get ready for tax season early to save time, stress, and money. Organize your documents and take advantage of last-minute deductions or credits.

Here are some steps to help you out:

• Gather Tax Documents: Collect W-2s, 1099s, receipts for deductible expenses, and other important paperwork.
• Prepay Deductible Expenses: If you itemize deductions, consider paying property taxes, mortgage interest, or charitable donations before the end of the year to boost your deductions.
• Explore Tax Credits: Look into available tax credits, like the Earned Income Tax Credit or Child Tax Credit, to see if you qualify.

7. Assess Your Emergency Fund

We had discussed in the past why we think an emergency fund is a really good idea. This can be a good time of year to review your needs and make sure you have enough money in your emergency fund to cover unexpected expenses like medical bills or car repairs.

Here are some steps to help you out:

• Set a Goal: Aim for 3 to 6 months’ worth of living expenses in your emergency fund.
• Automate Savings: Set up automatic transfers to your emergency fund to build it steadily.
• Top Up If Needed: If you used your emergency fund this year, make sure to replenish it as part of your new year’s financial plan.

8. Check Your Credit Report

I know some people (clears throat) think you don’t need a credit score. But for most of us our credit score is kinda like our financial health report. It affects whether you can get loans, what interest rates we can get, if we can get credit cards. A credit score may even affect if we can get a place to live. So, let’s make sure your credit report is in tip-top shape!

Here are some steps to help you out:

• Get Your Free Credit Reports: You’re allowed one free credit report from each of the big three credit bureaus (Equifax, Experian, and TransUnion) every year. You can get them at AnnualCreditReport.com. As a reminder, it can be a good idea to freeze your credit as each of these bureaus as well.
• Check for Errors: If you find any mistakes on your report, don’t hesitate to let the credit bureau know.
• Pay Your Bills on Time: It is really, really important to make sure we pay our bills before their due dates. This will help keep your credit score high.
• Keep Your Credit Card Balances Low: Please try to keep your credit card balances low compared to your available credit limits. This can be called your overall credit utilization. This will also help keep your credit score higher.

Remember, taking care of your finances is important for your overall well-being. So, let’s make sure your credit report is in good shape and that you’re on track to achieve your financial goals!

9. Set Financial Resolutions for the New Year

The start of a new year is a perfect opportunity to set fresh financial resolutions or goals. Think about what you want to achieve and create actionable steps to get there.

Here are some tips to help you out:

• Set Financial Resolutions for the New Year: The new year is a great time to set new financial goals. Think about what you want to achieve and make a plan to get there.
• Create a Vision Board: Visualize your financial goals, like buying a house or traveling. Make a vision board to help you stay motivated.
• Automate Your Progress: Set up automatic savings, bill payments, and investment contributions to stay on track.
• Celebrate Milestones: Break down your goals into smaller milestones and celebrate your achievements along the way.

10. Plan for Big Life Changes

Lastly, if you have any big life changes coming up next year, like getting married, getting a divorce, going back to school or completing school, having a baby, or buying a house, it can be a really good idea to start planning now to avoid financial stress in the future.

Here are some tips to help you out:

Create a Life Events Budget: Outline the costs associated with the event and start saving early.

Review Your Insurance: Make sure you have the right health, life, and property insurance.

Update Your Estate Plan: If you get married, have a baby, or anything else big, update your will, beneficiaries, and other estate planning stuff. We never like to talk about death. I know it’s uncomfortable. But these are important things to get into place while we are of sound mind and body.

Make the Most of Year-End Financial Planning

The end of the year is a great time to take a look at your finances, figure out what you want to do, and make sure you’re ready for the new year. By taking some time to review your finances, you can make sure you’re taking advantage of all the tax breaks you can, make progress to pay off debt, and set some new realistic goals. This will help you end the year strong and start the new year feeling more confident

Remember, personal finance is a journey, not a race. It takes time. Year after year. So please take your time to build a solid foundation, and you’ll be well on your way to achieving your financial dreams whatever they may be. Rock on, my friends \m/ \m/