As 2024 draws to a close, it’s time to take a comprehensive look at your finances and prepare for the upcoming year. A well-structured financial plan can help you achieve your goals, avoid unnecessary stress, and make the most of your hard-earned money. Here is a detailed year-end financial checklist to guide you through the essential steps to ensure your financial health in 2025.
1. Review your budget and spending
Start by reviewing your budget for the year. Compare your actual spending to your planned budget to see where you might have overspent or underspent. This review will help you identify spending patterns and areas where you can cut back or reallocate funds for the next year.
Tips for budget review:
- Analyze your bank and credit card statements for the past year.
- Use budgeting apps or software to track your expenses.
- Adjust your budget categories to reflect any changes in your lifestyle or financial goals.
2. Maximize retirement contributions
Ensure that you are taking full advantage of retirement savings opportunities. Contributing the maximum amount to your retirement accounts can provide significant tax benefits and help secure your financial future.
Retirement contribution limits for 2025:
- 401(k) plans: $23,500 (with an additional $7,500 catch-up contribution if you are 50 or older).1
- IRA (Traditional and Roth): $7,000 (with an additional $1,000 catch-up contribution if you are 50 or older).1
Remember to consult with a financial advisor to determine the best retirement strategy for your situation.
3. Review your investment portfolio
The end of the year is a perfect time to review and rebalance your investment portfolio. Ensure that your asset allocation aligns with your risk tolerance and financial goals. Consider the performance of your investments and make adjustments as needed.
Portfolio review steps:
- Evaluate the performance of each investment.
- Rebalance your portfolio to maintain your desired asset allocation.
- Consider diversifying your investments to reduce risk.
4. Plan for taxes
Tax planning is a crucial part of year-end financial planning. Review your tax situation and take steps to minimize your tax liability. This may include making charitable donations, harvesting tax losses, or increasing retirement contributions.
Tax planning tips:
- Estimate your tax liability and adjust your withholding or estimated payments as needed. Use the IRS Tax Withholding Estimator to tailor your income tax withholding.
- Consult with a tax professional to explore tax-saving opportunities and tax-efficient investment strategies.
5. Check your credit report
Regularly reviewing your credit report is essential for maintaining a healthy credit score and identifying any potential errors or fraudulent activity. Obtain a free copy of your credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) and review it carefully.
Credit report review tips:
- Look for inaccuracies or unfamiliar accounts.
- Dispute any errors with the credit bureau.
- Consider credit monitoring services for ongoing protection.
6. Update your financial goals
As you review your finances, take the opportunity to update your financial goals. Reflect on your accomplishments over the past year and set new objectives for the year ahead.
Goal-setting tips:
- Set specific, measurable, achievable, relevant, and time-bound (SMART) goals.
- Create an action plan to achieve each goal.
- Review and adjust your goals periodically throughout the year.
7. Review insurance coverage
Ensure that your insurance coverage meets your current needs. This includes health, life, home, auto, and any other relevant policies. Update your coverage as necessary to reflect any changes in your personal or financial situation.
Insurance review tips:
- Assess your current coverage and identify any gaps.
- Shop around for better rates or additional coverage.
- Consider bundling policies for potential discounts.
8. Review your beneficiary designations
It is essential to periodically review and update your beneficiary designations on your financial accounts and insurance policies. Life changes, such as marriage, divorce, the birth of a child, or the death of a loved one, can affect your intended beneficiaries. Ensuring your designations are current helps avoid potential conflicts or legal issues in the future.
Beneficiary review tips:
- Review all accounts and policies, including retirement accounts, life insurance, and investment accounts.
- Confirm that your beneficiary designations align with your current wishes and estate plan.
- Update your designations as needed, keeping in mind any changes in your personal or financial circumstances.
9. Spend eligible flex dollars
If you have a Flexible Spending Account (FSA) or Health Savings Account (HSA), remember to use your eligible dollars before they expire. These accounts offer tax advantages for qualified medical expenses, so make sure you take full advantage of your available balance.
Flex dollar spending tips:
- Review eligible expenses to maximize your benefits.
- Schedule any upcoming doctor visits, dental checkups, or medical procedures.
- Purchase eligible health products or services, such as prescription eyeglasses, contact lenses, or over-the-counter medications.
- Keep all receipts and documentation for tax purposes.
10. Build or replenish your emergency fund
An emergency fund is crucial for financial stability. Aim to have three to six months’ worth of living expenses saved in an easily accessible account. If you have used your emergency fund during the year, focus on replenishing it.
Emergency fund building tips:
- Set up automatic transfers to your savings account.
- Save any windfalls, such as tax refunds or bonuses.
- Reduce discretionary spending to boost your savings rate.
11. Plan for major expenses
Consider any significant expenses you anticipate in the coming year, such as home repairs, medical costs, or a vacation. Start saving for these expenses now to avoid financial strain later.
Expense planning tips:
- Create a separate savings account for each major expense.
- Set up automatic contributions to these accounts.
- Monitor your progress and adjust your savings as needed.
12. Seek professional advice
Should you have any uncertainties regarding your financial planning, consider consulting with a financial professional who can assist in developing a thorough and comprehensive financial plan.
Finding a financial advisor:
- Look for a CERTIFIED FINANCIAL PLANNER® professional or a fiduciary advisor.
- Ask for recommendations from friends, family, or colleagues.
- Check the advisor’s credentials and reputation. BrokerCheck is a free tool to research the background and experience of financial brokers, advisers and firms.
By following this year-end financial checklist, you can work toward a prosperous and financially secure 2025. Take the time to review and adjust your finances, and don’t hesitate to seek professional advice to ensure you are on the right track.
