Tips for an Effective Year-End Financial Review


4 Tips for an Effective Year-End Financial Review

It's the holiday season -- time for your financial check-up.


Ah, the holidays. A magical time of year that brings families and friends together—and ranks highest in consumer spending. As you finalize your holiday travel plans, plan for holiday festivities (and shopping) and reflect on 2015, make sure to carve out time for your year-end financial review. Not only will it help you assess your financial activities and progress, but a thorough assessment can help better prepare for the year ahead.

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Below are a few recommendations for an effective year-end review:

1) Pencil Quality Time in with Your Financial Adviser. While you are most likely in touch with your financial planner throughout the year, December and January are good times to get a face-to-face meeting on the books, if possible. Use the time together to ensure he or she is up to speed on all of your 2015 life updates, and start discussing your 2016 goals. Do you need to start thinking about your child’s college education? Have your insurance needs changed? Have your career ambitions changed? Do you anticipate a significant change in income or expenses?


2) Give Back to Charity. With the deadline for deducting charitable contributions coming up on Dec. 31, now is a good time to give back to your favorite organizations or perhaps support new ones. This can be done through a direct contribution, a private foundation or perhaps a donor-advised fund (DAF). In the latter case, donors can make a charitable contribution and receive an immediate tax benefit, but recommend grants to a favorite charity, once ready.

3) Maximize Retirement Accounts. The 2015 maximum 401(k) contribution is $18,000 ($24,000 for those over 50). If you haven’t already done so, use the remaining time this year to max out your 401(k). In addition to helping increase your account balance, maxing out those contributions can help reduce your taxable income. You can also make changes for 2016—contribute more, if possible. And if you don’t have a retirement plan in place, start one today. It’s never too late, but always important.

4) Plan Ahead for Tax Season. Speaking of taxes, increased 401(k) contributions and charitable giving are great ways to lower that tax expense. In addition, investors can consider realizing investment losses (if applicable) through practice known as tax loss harvesting. Doing so enables investors to offset taxes on both gains and income. No matter what the tax savings recommendation is, now is a great time to get organized for tax season—at the very least, get your paperwork in order and get ahead.

While the holidays can certainly be stressful, performing an end of year financial check-up can help take the stress out of financial life and better prepare you for 2016. So, be proactive today, and put yourself in the best possible financial position as you ring in the New Year. Happy holidays!


See Also: 7 Smart Ways to Lower Your Taxable Income

Taylor Schulte, CFP® is founder and CEO of Define Financial, a San Diego-based fee-only firm. He is passionate about helping clients accumulate wealth and plan for retirement.

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