Year-End Financial Tune Up

With the new year approaching, it’s a great time to undertake a number of personal finance moves to ensure that things are on track and you are progressing with respect to your long-term financial goals.  Here are some things that I do every December/January:

–Prepare a budget for next year — many revenue and expense items change along with the changing of the calendar. This provides a great time to start fresh with a budget.  Are you receiving a raise or a promotion, have you shifted to more freelance work, will your healthcare costs increase? In preparing a preliminary monthly budget for the next year, review last year’s expenses and make sure they are realistic.  Were there any areas where the budget was way off  For me, I will be incorporating rising insurance premiums.  Interestingly, for last year, the grocery budget was underspent and the restaurant budget was overspent, almost every month.  Gives me an idea of where to focus attention next year (cooking more).

–Adjust tax and automatic investment withdrawal amounts — did you give a large free loan to the IRS? do you have room to increase retirement savings each month? Getting a fresh start on the new year with payroll adjustments is good.  Be sure these adjustments are reflected in the budget above.

–Organize your tax situation – as taxes typically operate on the calendar year, complete any tax related sales or transfers by year end.  Although, you will have until April 15 to make contributions to retirement funds for this year, the tax deduction cannot be carried over from year to year.

–Be sure expiring perks are used — these include unused vacation days, flexible health spending accounts, as well as expiring frequent flyer miles and cash like items.

–Review your longer term goals – and be sure you are on target.  Are you saving for a downpayment? early retirement? How have these progressed.  Is your investment portfolio appropriately aligned with respect to risk? Do you need to make some changes?

shared at this week’s Carnival of Personal Finance