2022 Year-End Financial Checklist

The end of the year is a great time for getting together with family and holiday cheer. But it’s also a good opportunity to fine-tune your financial habits and make some improvements. Here are 10 year-end things to put on your 2022 financial checklist as we go into the new year.

1) Audit Last Year’s Expenses

Oftentimes, the way we spend our money is something that happens subconsciously. You might always order the same expensive plate when you go to a restaurant or think you need something every time you log on to Amazon. However, it’s in your power to change your ways.

A good place to start is by reviewing last year’s transactions and trying to identify some areas for improvement. You could go through each credit card manually, but an easier way would be to use a budgeting app like Buxfer. Buxfer collects data from all of your banks and credit cards and condenses it into one convenient report. This will give you a more holistic overview of where you’re money is going and what can be done better.

2) Prepare Your Budget for Next Year

If you don’t already do this, then the end of the year is the perfect time to start planning out your overall budget for next year. This should include your regular monthly expenses plus any upcoming major purchases like improvements to the house or a new vehicle. 

By taking the time to plan all of this now, you’ll be able to make adjustments where they’re needed. You’ll also be far less likely to get yourself into any unnecessary debt.

3) Pick a Debt to Pay Down

How much money would a free up in your cash flow if you are to eliminate one of your biggest debts such as a high-interest credit card balance, auto loan, or even your mortgage? No matter which one you choose, pick one and commit to paying it off as quickly as possible. Two helpful strategies that many people have used with success are the debt snowball method and the avalanche method.

4) Build Up Your Emergency Fund

We’ve all probably heard a million times that you’re supposed to have a large stash of cash ready to go at any time in case there’s an emergency. Yet, the majority of the population never does this. Bankrate reports that only about 44 percent of Americans could cover an unexpected, $1000 expense.

If you’ve been slacking in the emergency fund department, or if you’d just like more financial security, then make this one of your priorities this year. A good target to aim for is 3 to 6 times your monthly living expenses. Here are some tips on how to build up your emergency fund.

5) Contribute to an IRA

Every year, taxpayers have until April when their federal income tax returns are due to contribute to their IRAs. If you’re eligible for either a traditional or Roth IRA, then consider using it.

IRAs are great because you can open them and virtually any financial institution of your choice and pick the investments of your choice. On top of that, you’ll get a tax break either this year or in the future depending on if you go with a traditional or Roth IRA. In both cases, you won’t pay any taxes while the money is growing inside the account which will lead to even greater compound growth.

6) Increase Your Retirement Plan Contributions

Speaking of retirement plans, be sure to also raise your contribution rate this year if you’ve got a 401(k), 403(b), or 457. Due to inflation, the IRS has raised the maximum contribution limits to $22,500 per individual (or $30,000 if you’re age 50 and older). Considering each dollar contributed to one of these plans gets deducted from your taxable income, that’s a huge opportunity to save a boatload of money off of your tax bill next year.

7) Rebalance Your Portfolio

Given how turbulent the markets were this year, it will definitely be a good idea to rebalance your portfolio and align it to your original asset allocation. Rebalancing is a process of selling your winning investments to buy more shares of the underperformers. It essentially forces you to buy low and sell high – exactly what every disciplined investor should strive to do

8) Check Your Credit Score

If it’s been a while, since you’ve checked your credit, score, now would be a good time. An easy way to do this is through your credit card app since most of the major carriers now offer this as a free service.

Take note that if your score is lower than expected, it could mean there’s a potential issue in your credit history. Download a free copy of your credit report from one of the three major bureaus (Equifax, Experian, and TransUnion) and investigate.

Even if your credit score is fine, consider what actions you could do to improve it. These might be simple things like putting your bills on auto-pay (so that they’re always paid on time and in full) or utilizing less of your total available credit. Check out our blog post for more good credit-building tips.

9) Start Collecting Your Tax Documents

The beginning of the new year is exactly the right time to start collecting all of the financial documents you’ll need to prepare your tax returns. Begin by making a list of all of the sources of income you had this year: employers, investments, interest, etc. As these documents start to become available online or by mail, you can check them off your list or contact the provider if needed.

10) Check Your Beneficiaries

Finally, it’s the easiest thing you can do, but it will also be one of the most effective: Check the beneficiaries you have listed on every account. 

Your beneficiaries are the people who will legally be entitled to your financial assets if you were ever to unexpectedly pass away. This will be extremely important, especially if you have dependents who will be relying on financial support. Do them and yourself a favor by taking five minutes to log in to each bank, investment, and life insurance policy to ensure the people you have listed are correct.

Featured image credit: Unsplash

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