Your Year-End Checklist

Question of the Week

Your Year-End Checklist

Happy Friday, all!

The end of 2022 is here. And for many of you, 2022 couldn’t come any sooner. So before we get to the celebration and hope what the new year will bring us, here are some steps you can take to get financially ready for the new year.

1) Review your goals:  The end of the year is a great time to review the goals you made at the beginning of the year and set new ones for 2022. How did you do this year?  Anything you’re proud of accomplishing? I like to start with bright spots because you can mirror those successes in achieving your new goals. Anything you wish you could have done better? You can also learn from any potential stumbling blocks and figure out how to use them as stepping-stones next year. This step also might include reviewing that all-important net-worth figure to see how much progress you’ve made in your financial health this year.

2) Update your budget: Did you save the money you wanted to? Pay off the debt that you needed to? The end of the year gives you a solid endpoint to assess whether the financial year you had matched the goals you set at the outset of 2021. Didn’t have a budget or financial goals? There is nothing like the start of the year to use a budget that works finally.

3) Create a holiday bucket: Speaking of your budget, get intentional with how much you want to spend this holiday season. Christmas may look a lot different this year. But you can still create a separate bucket for holiday spending and when that money is gone, stop spending. You’ll thank yourself in January when you don’t have a huge credit card bill.

4) Spend those benefits that you will lose: Whether it’s vacation days, or a medical or dependent care flexible spending account (FSA), some of your workplace benefits won’t roll over to 2022. So take stock of what you have let and use them to your advantage.

5) Make any last charitable contributions: December 31 is the last day your charitable contributions can go on your 2021 tax return. If giving to charity is a part of your spending plan, you can use these questions to help make the most of your charitable giving.

6) Pump up your 529: As with charitable contributions, the tax deduction for your 529 will have to be made by December 31 to count on this tax year. Your state may be one of over 30 that allow you to deduct your contribution. You can find the specific deduction here. If your state is one of the four that allows an unlimited deduction, keep in mind the yearly gift-tax and super-funding rules.

7) Max out your 401k: While you have until April to make contributions to your traditional IRA, Roth IRA, and HSA, you can only contribute to your 401k through December 31, so if you have extra cash and are looking to boost your savings considering contributing your last couple of checks entirely to your 401k. This step also includes Solo 401k employee contributions for you business owners.

8) Find your tax return: Tax season is just around the corner. So there’s nothing like some downtime during the holidays to get organized and ready to prepare your return early. You can also use this time to assess whether something like a Roth conversion is best for you.

9) Review your business structure: Evaluate your business structure and the QBI deduction for any changes you need to make to your business. This review may include setting up a solo 401k, which would need to be done by December 31 (although you can make employer/profit-sharing contributions up to the business tax filing deadline).

10) Defer income and incur expenses: Speaking of business owners, for you cash-basis taxpayers, it’s an excellent time to defer income (push it off until 2022) and incur business expenses that you know you may have at the beginning of the year. This step is an easy way to reduce your tax liability for 2021. However, remember not to spend money on business expenses that you wouldn’t otherwise buy just for a tax deduction. For example, paying $1 to save 24 cents still costs you 76 cents.

11) Will and Trust review: Most people reflect on the year and take stock of all of the changes that happened in their lives. Remember that your estate plan is also affected by those changes and needs to match your current situation. For example, getting married, divorced, or having kids makes a big difference in your estate plan. So check your documents accordingly.

12) Insurance Documents – Just like your Will and Trust, your insurance documents should cover your current situation. Therefore, review your life and disability insurance policies to make sure they protect your current income and those dependent on it. Your renters or homeowner’s insurance should insure any additional big purchases you made during the year. And lastly, you should review your health insurance policy for any upcoming changes for 2021. For those enrolling in the Market Place, you have until December 15 to pick your plan.


Quote of the Week

“Nobody can go back and start a new beginning, but anyone can start today and make a new ending.” – Maria Robinson


Task of the Week  

My last bonus task is to enjoy this holiday season. I love the holidays because you can reflect and appreciate what you have. This year, we’ve been tested a lot, including a pandemic, racial unrest, and a contentious election. Nevertheless, I hope the end of the year brings you some comfort and peace.