End-of-the-year personal finance checklist

Written by
Marty Duren
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As another year winds to a close, many people face an old anxiety: “Do I have enough money to get through the holidays?” or “What will I do next year if I can’t get my finances reined in?”

Americans owe more than $887 billion on their credit cards, up 13% from a year ago, and total American household debt surpassed $16 trillion earlier this year.

Negative cashflow is a growing concern for a lot of people.

Since time immemorial (okay, maybe not that long, but a long time) people have used the new year as a marker for making changes. New Year’s resolutions anyone?

That annual restart is a great time to drop some goals, reconfigure others and strategize effective plans to reach them. This is especially true regarding money and perhaps most especially now given the economic environment.

So, thinking of this article as a New Year’s resolution for your money, here are eight  personal checklist items to help you get ready for for the new year.

1. Prepare yourself for tax season

It’s time to take a look at your charitable giving, your retirement accounts, 529 contributions and other calendar year financial topics so that you’re in the best possible position come tax time.

“When it comes to end-of-the-year charitable contributions, I’m always thinking, ‘Can people fast-forward some their planned giving for next year into this year to get more of a deduction based on having already met their standard deductions?’” explains Russ Ford, a financial planner and founder of Wayfinder Financial. “Also, look at 529 contributions if your state has a special tax credit or tax deductions. Those can be very beneficial depending on the tax situation.”

And it’s not too early to look through your file cabinet and ensure you have your documents and paperwork in order for easy filing come tax time. Furthermore, go ahead and get on the schedule with an accountant to handle your filing, it’s a step Ford says he wishes more people would take.

“The biggest thing that is applicable across the board and leads to the highest common percentage of mistakes or things that could have been done differently to save money would be spending a couple hundred dollars to hire a CPA to do your taxes for you,” Ford recommends, explaining that he regularly spots mistakes that lead to filing amendments for clients who have taken the DIY approach to their taxes.

2. Balance your wallet

Do the credit cards you have still work for you or is it time to consider a change? Per Experian, Americans held an average of 3.84 credit card accounts at the end of September 2020. Changing circumstances often call for different approaches.

Have you been using a travel rewards card when you already know you won’t be traveling for a while? Maybe it’s time for a cash-back card. Or maybe you’ve been holding onto store cards for brands you no longer frequent. Consider whether a general points or cash-back card will provide rewards you’ll actually use.

Cash-back card offers change regularly. Options include both no-annual-fee and annual fee cards along with widely varied percentages of cash back earned based on where you use the card, whether for gas, groceries or other purchases. CardRatings recommends reassessing your credit cards every time you have a significant life change – a new job, a new baby, a kid heads to college, or a change in marital status, for instance – and at least once each year even if none of those things has changed.

If you have been leaving money on the table, now might be a good time to put it back in your pocket by using a rewards card that fits your lifestyle and spending habits.

3. Assess your auto-pay subscriptions

Many if not most discount subscription offers auto-renew at the end of the trial period. When the six-week or three-month special is over, you begin paying the full rate or at least a not-as-discounted rate.

It is up to you to cancel before the increase if you wish to avoid the higher price. This can be tricky.

Marty Duren

Marty Duren

CardRatings Contributor

I recently took advantage of a deeply discounted weekly-magazine subscription, noting when I subscribed the date at which the price increase would go into effect. I marked my calendar for a week or two in advance to cancel the auto-renew.

But, it auto-renewed even earlier, so I had to “visit” customer service to correct it. Don’t get caught in this trap.

In addition to rate changes, there are plenty of auto-pays people forget. Are you auto-paying for streaming services, satellite, cable TV, or cell phone service without noticing that the monthly rates have increased. Or are you continuing to pay for services you no longer use? Are you auto-paying extra on a fixed-term zero-interest loan? What about donations to a charitable cause you’ve lost interest in?

Cancel auto-pay on any services you no longer use or to organizations you no longer want to support (or reduce as desired). Save, invest or at least spend more intentionally the freed-up cash. If necessary, use it for other expenses, which brings us to the next tip…

4. Make a “pay off credit card debt” plan

With interest rates continuing to rise, the sooner you put a plan into action the more you will save. Because banks charge interest on top of what the Fed sets as the prime rate, your rates can really go up. For instance, as this CardRatings article explains, “if the Prime Rate is 4.25% and your bank adds a margin of 8%-18% depending on your creditworthiness, your APR will be 12.25%-22.25%.”

Using the above data, paying $100 a month on a $5,000 balance at 12.25% will take 70 months and accrue $1,945 in interest. At 22.25%? It will take 136 months (uh, that’s 11 years), and we don’t want to talk about the interest.

Now, here’s a plan that is simple and has worked for a lot of people.

Compare your balances, interest rates, and minimum payments on each debt. Choose the debt with the smallest balance and begin paying as much as you can each month, while paying only the minimum on the others. After you pay off your smallest balance debt, add the entire amount you’ve been paying on that debt to the minimum payment on the debt with the next highest balance. After paying that one off, move to the next, until you pay off all your debts.

If you have two debts with close to the same balance but one has a substantially higher interest rate, pay the higher rate debt down first.

5. Pull your free credit reports and check them carefully

Checking your credit report is important. Regular checks help you find and dispute any errors, be aggressive against credit fraud, ensure payments that should be reported are being reported, and to strategically improve your credit. Credit report errors aren’t uncommon, so don’t assume your report is error-free. Since your credit scores are based on what’s in your credit report, keeping it accurate with each agency is important to your financial health.

Checking your credit report does not affect your credit score.

Through December 2023, you can pull all three reports for free once a week (it’s normally once every 12 months). If it’s been a while since your checked yours, now’s the time. Annualcreditreport.com is the official website through which you can check your reports.

6. Collect receipts/check balances of FSA/HSA funds

Do you know how much money is in your FSA or HSA? Once those contributions are turned on some folks forget to check them. They are just glad for the tax benefit!

Flexible Spending Account contributions, both medical and dependent care, have to be spent within the year they were withheld, so you’ll need to make sure you’ve claimed it all by year’s end or you’ll lose it. Make sure to keep in mind that many medical service providers are closed the last week of the year and plan accordingly.

Health Savings Account funds can be redeemed whenever needed, but year-end is a convenient time to make sure you have all that in order. Do you have enough in your HSA to cover the next year’s deductible in full? Consider moving that withholding (or a portion of it) to a 401(k) contribution or to pay off high-interest debt.

“End-of-year time is a good chance to assess whether you can use your HSA in an even more beneficial way next year by investing your HSA instead of using it to cashflow your medical expenses,” says Ford. “[An HSA] is the most tax-advantaged investment account hidden in plain sight because you get the tax-free advantage when you pay into it, and you can invest it so it grows tax-free.”

7. Investigate your student loan repayment/forgiveness options

Applications for the one-time federal student loan debt forgiveness program are currently paused due to a lawsuit, but that doesn’t mean there aren’t other options to consider when it comes to your student loans.

Consider programs such as Public Service Loan Forgiveness through which some people who work for the government or a non-profit organization can qualify for full student loan debt forgiveness. There are also programs related to forgiveness for teachers and payment plans based on your income.

The point is there is a lot to review and not everyone will qualify, but if you have federal student debt, you should check out all your options if you haven’t already.

Whether you qualify for student loan forgiveness or not, make sure to make your payments on time so your credit score is not adversely affected.

8. Take a look at your insurance policies

Insurance policies, like credit cards, should evolve as your lifestyle and needs change. Unlike credit cards, insurance policy costs tend to rise every policy term and it’s easy to settle into an auto-pay cycle without noticing how much your policy may have increased in cost since you first bought it.

Shopping around for new policies could save you hundreds of dollars. These days, it’s simple to “break up” with your current insurance company should you find a better option elsewhere, so don’t keep paying more than you need to.

Even if you aren’t ready to move on from your current provider, examine your existing policies to see whether you could make some changes in coverage or deductibles that might save you money. For instance, are you carrying comprehensive insurance on an older vehicle that no longer really needs that level of coverage? Could your finances handle paying a higher deductible should you have to file a claim?

“Consider looking at [your home insurance] policy and raising the deductible on that,” Ford recommends. “Home insurance, for most people, should be about protecting against a worst case, disaster scenario. If you raise your deductible by a thousand dollars it could save you a few hundred on your policy.”

Final thoughts

Economic times are tough; inflation is still high the world over. But you can be better prepared when you review your financial situation and have a plan to tackle it. Implementing this short checklist will get you on more sure footing heading into the future.

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