It can be hard to keep track of all the various financial tasks you need to do during a given year. Today I thought I would share a list so you can map it out on whatever calendar application you like to use. Here are some of the key financial tasks that should be done at least once per year.
Beginning of the Year Activities
1. Set Financial Goals and Personal Financial Plan
Set up your Personal Financial Plan with SMART goals is one of the most important things you can do to improve your finances. There are three basic steps you should follow when setting financial goals:
- Make a List of Your Financial Goals
- Prioritize Your Goals
- Calculate How Much You Will Need Accomplish Each Goal
- Figure Out How You Will Fund Your Goals (Action Items)
- Track Your Progress
Make a note to review and update your plan every quarter
2. Set Up Your Budget
Re-evaluate your budget and make adjustments. You should look at the full-year budget at the beginning of the year to take into account irregular expenses so that you can plan ahead.
After the initial budget is set up, review it regularly, e.g., weekly or monthly. Think about things you can do to improve your cash flow and make budgeting easier. Here are some ways to increase your income and reduce your expenses:
- 40+ Passive Income Ideas and Ways to Make Extra Money
- 40+ Ways to Save Money, Lower Your Bills, and Cut Expenses
3. Increase Your Contribution to Retirement Plans and Savings
The government generally increases the contribution limits on 401(k) and IRAs each year. If you were able to max out your contributions the previous year, or even if you didn’t, it is a good idea to increase your contribution each year.
- IRA Contribution Limit is $6,000, or $7,000 if you’re age 50 or older (per person)
- 401(k) Contribution Limit is $19,000, plus $6,000 catch-up contribution if you’re age 50 or older (per person)
- 529 Plan or Education Savings Account – if you have a child, there are some great tools to help you save for education expenses.
If you don’t have automatic contribution sets up, you will have to do this throughout the year.
During the Year Activities
1. Rebalance Your Portfolio
Setting your investments on an automatic contribution schedule is fantastic. Ignoring your portfolio too long is dumb.
At least once a year, you should be taking a look at your portfolio and rebalancing your asset allocation. That sounds like a complicated concept, but all it means is to make sure you have the right percentage of money in each asset class according to your financial plan.
For example, if you want 70% of your money in stocks and 30% in bonds, checking your allocation will show how far off you are. If you find yourself at 75% stocks and 25% bonds, you would then rebalance your portfolio by selling the extra 5% of stocks and reinvesting that money into bonds — restoring the 70-30 asset allocation
Why is rebalancing so important?
It’s really simple: it forces you to sell high and buy low. It is easy to “let things ride” when stocks have had a great run, but regularly selling the areas of your portfolio that have grown and buying the areas that have shrunk will enhance your investment returns in the long term.
Tip: You can also rebalance your portfolio whenever there is a substantial increase or decrease in the stock market.
2. Harvest Tax Losses
Harvesting your tax losses is where you sell investments that are worth less than what you paid. You can use the resulting difference to either offset capital gains from profitable investments that you sold, and use up to $3,000 of the loss to offset your income tax owed to the government (you can roll any extra loss above $3,000 to the following years until it is used up).
Another benefit to harvesting tax losses: you don’t have to leave your investment forever.
Let’s say you invested $10,000 in an S&P 500 index fund right at the market’s peak. You could sell the fund when the market drop, take that loss against your income that tax year, and repurchase the shares 31 days later. Just be careful about the wash sale rule — there are very specific rules the IRS has in place to where you can’t repurchase the same or very similar share for a month after you sell.
Tip: You can also harvest tax losses whenever there is a significant decrease in one of your investments.
3. Shop Your Insurance Rates
Just because you got lower rates this year doesn’t mean that rate will be the lowest next year. Premiums tend to go up each year without any reason. Spending a few hours dedicated to shopping for better insurance rates can result in a significant saving of money over the coming years. You can usually group them into two parts:
- Life, health, dental, and vision – These are often part of your employer’s benefits package, and you can choose your coverage during the Open Enrollment Period. If not, or if you need additional coverage, be sure to put these on your calendar.
- Home and auto – Here is an article I wrote on how you can significantly save money on your home and auto insurance. While you’re on the phone, you can also ask the insurance agent about your umbrella policy.
- Umbrella – You should also consider getting an umbrella insurance policy if your net worth exceeds the liabilities coverage amount on your car and home insurance.
As you shop for better insurance rates, be sure to make adjustments to accommodate any changes in your situation.
4. Shop Around for Better Checking and Savings Accounts
When was the last time you take a look at your banking accounts? Is your money still sitting in accounts that are earning you virtually nothing? Did you know that there are savings and checking accounts that pay over 2% interest for your money? Take a look at these:
5. Shop Around for Better Credit Cards
The same goes for credit cards. If you pay off your cards every month, you should absolutely use them to get the rewards. I personally like cashback reward cards and here are some of the best cashback credit cards with a 5% reward.
6. Review Your Home Services
Your home uses many services, such as television, internet, telephone, cell phone, home security, etc. Negotiate for a lower rate or change to a different provider. If you own a business, do the same for your business as well.
Cancel unused or underutilized subscriptions, memberships, and services
7. Check Your Credit Score
There are plenty of free credit score websites where you can check your scores regularly. Do this at least once quarterly. See How to Get Free Credit Score (No Credit Card Needed).
8. Check Your Credit Report
The free credit score website Credit Karma also lets you see your TransUnion report. But to see all 3, you have to use AnnualCreditReport.com, which let you get one free report from the three bureaus once a year. Spread this out once every four months so you can check your reports regularly. See How to Get Free Credit Reports.
9. Adjust Your Tax Withholding
Right after you file your taxes, you should adjust your tax withholding. If you owe money to the IRS and State, withhold more money. If you got a big refund check, that is an interest-free loan to the government. You are better off lowering your withholding and get a little more money in each paycheck. Your goal should be getting as close to $0 as possible as far as a tax refund/tax owe goes.
10. Review Your Net Worth
About once a quarter, you should review your net worth to see if you are moving in the right direction. Using a free money management tool like Personal Capital makes it super easy to see your net worth at any given moment. See How to Calculate Your Net Worth.
End of the Year Activities
Some of these activities could be done any time during the year, but doing it at the end of the year allows you to make sure you maximize all the opportunities.
1. Set Holiday Shopping Budget
Sometime around October to November, you should start planning for your holiday spending. This is also a great time to review and update your budget for the rest of the year.
2. Pay Property Taxes for Next Year
If you need a little extra tax deduction, you can pay your next year’s property taxes early. Tax payments can be claimed in the year it is paid.
3. Pay January Mortgage in December
Similar to the pay your property taxes early trick, this allows you to deduct mortgage interest paid against next January in the current tax year.
4. Donate to Charities
Charitable donations are tax-deductible as long as you can produce proof when requested. Non-cash donations are also tax-deductible, but it’s a little more involved; especially if you donated more than $500 worth. Besides cash, here are some of the things you can donate:
- Appreciated Assets – For example, you can donate stocks, bonds, etc.. This is a better than cash option because you could deduct the full value of the stocks without paying the capital gains tax.
- Old Car – Typically, the organization would take it away for free, coordinate the title transfer, and provide a tax-deductible donation receipt. The IRS allows you to deduct the fair market value of your vehicle.
- Items – You can donate some items at the fair market value. For example, used clothes, furniture, electronics, appliances, etc. are tax-deductible.
See How to Maximize Your Charitable Contributions.
5. Use Up Flexible Spending Account (FSA)
If you have a Flexible Spending Account (FSA) for dependent care, healthcare, or transportation expenses, the funds may be expiring at the end of the year. If they’re not expiring on December 31, they will almost certainly expire by March or April. Start planning on how you’ll be using up the money because if you miss the deadline, the remaining balance is lost. If you cannot use up your FSA, use it as a lesson for next year, and estimate expenses accurately before locking your money away!
6. Plan Your Doctor and Dentist Visits
Each year, you go through the pain of paying the deductible. If you already fulfill your deductible requirement this year, you should take advantage of your insurance coverage and visit your doctors for last-minute check-up and treatments. Try to schedule the appointments before December 31st. They’ll cost you less now than they will at the beginning of next year when your deductibles reset.
Moreover, your medical expenses exceeding 7.5% of your adjusted gross income (AGI), the excess amount is tax-deductible.
7. Buy Business Equipment and Supplies
If you own a business, you can make your purchases before December 31st and claim these expenses against your business income. For bloggers and other small business owners, take a look at “46 Tax Deductions that Bloggers Often Overlook” at ProBlogger for additional ideas.
8. Pay Your Vendors Early
Likewise, pay for any services rendered by your vendors before the end of the year to claim these expenses against your business income this tax year.
9. Max Out Your Retirement Plans and Savings
Do the final check-up on your retirement plans and savings to make sure you’re on track to max out (if you can) your contributions before the deadline. 401(k) contribution deadline is the last business day of the year; for other accounts, you have some time in the following year to make your contributions.
10. Take Your Required Minimum Distribution
If you’re 70.5 years or older, and you haven’t withdrawn from your retirement account(s) this year, you have to take a minimum distribution from your accounts. Be sure to follow the required minimum distribution rule and withdraw money from your IRA and 401(k).
11. Review Your Will and Estate Plan
Has there been any significant life event during the year? If the answer is yes, review your will and estate plan to make sure it still meets your current needs.
12. Review Your Beneficiaries
Listed beneficiaries for your retirement accounts and insurance plans take precedence over your will. So review them carefully so that these funds are distributed as intended.
Your To-Do List
- Set up a financial calendar — Remembering to do financial tasks that only occur every 6 to 12 months is difficult. Make sure you set up a calendar plan to remind yourself of these tasks.
- Set up an alert so that you’ll remember what needs to be done.
- Follow through and take care of the task.
Let me know what you think: have I missed any major annual financial events?
Pinyo Bhulipongsanon is the owner of Moolanomy Personal Finance and a Realtor® licensed in Virginia and Maryland. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, financial literacy author, and Realtor®.
My parents have always taught me to look after my finances and each year I check my credit score to make sure that its ok as you mention in point 11. A friend of mine had his identity stolen and would not have known this until he checked his credit score and saw that someone else had taken out finance in his name.
So if I was to take 1 point from this article it would be to check that every year. I know I do!
This is a great resource! It’s nice to have it “checklist style” and all in one place. I like that you list setting financial goals as a yearly to-do; it is important to keep re-analyzing where your goals are at. Excellent post, thanks!
Great tips! When we decided to spend less than our income and live frugally, we cancelled our cable and landline services. Similarly, I also canceled my subscription to parenting and food magazines. We also downgraded our cellphone to lower plans. It reduced our expenses to 12%.
Thanks for the list. It will come in handy.
Great list, but it’s hard to do all those things in a single day. I like the idea of setting up a financial calendar.
Setting clear goals is critical and i personally find that this is very very helpful to help me plan ahead and also to review how I have been doing.
Starting in 2012, I changed my attitude by becoming responsible and not to continue with my habit of “I don’t care”. In January 2012, I started to gather, sort and organize my financial records so that when February 2013 comes, I have all my records ready for preparing my 2012 income tax returns. In June 2012, I created my first website (gohotmoney.com) with a desire to earn money through blogging to pay all my credit card and other debts. I was inspired by Moolanomy’s success and I want to duplicate it in the coming years through my blog. In March… Read more »
Great list. I would add quarterly and yearly home repairs.
One financial tasks that I have not paid much attention too in the past was taxes probably because I was just a W2 employer. Now that I am an entrepreneur, I have to pay much closer attention to my taxes and get them handled by a tax professional instead of using something like turbo tax.