Your year-end financial checklist

A personal financial review every few months can help you maintain your financial situation and reduce money-related stress.

When making New Year’s resolutions, working on financial happiness is often a top priority. However, if the economic situation worsens in 2023, it can be difficult to plan for financial goals.

With continued inflation and a recession looming next year, you may want to save more money despite higher prices for food and other goods. But you’re not alone. In 2022 (up from 2021), 54% of working adults who contributed equally or less to retirement savings said inflation and the high cost of living prevented them from saving more.

An unstable financial environment can lead to confusion about what to prioritize, where to place available funds, and what to expect. Greg McBride, chief financial analyst at Bankrate, provides the latest information on what the CFA needs to do to ensure that 2023 begins with the right financial conditions.

Financial Checklist. Here’s what to consider:

Maximize your retirement contributions.

In 2022, you can save $20,500 ($22,500 in 2023) in a 401(k) or other employer-sponsored retirement plan, and if you’re over 50 this year, you can earn an extra $6,500 ($7,500 in 2023) to “catch up.” Donation.

Even if you don’t have a work plan, you can earn up to $6,500 ($7,500 if you’re over 50) from your existing IRA by 2023 and your spouse if you’re not working.

If you are a freelancer or self-employed, the limit is much higher. Up to $61,000 in 2022 ($66,000 in 2023) or less than 25% of your eligible income if the new Windows IRA plan has a simplified employee pension (SEP) open. Even if you don’t, you have time to prepare to take advantage of the tax benefits.

It’s also a good time to review your investments to make sure your retirement investments are working as expected and are in line with your strategy. If market performance is causing your asset allocation (the portion of your portfolio that is used for certain types of investments) to be out of target, you may need to rebalance it to get back on track.

Review employee benefits.

It’s tempting to just hum about your employee benefits behind the scenes, but reviewing them each year can make a big difference. Look at your employer-sponsored 401(k) or IRA contributions this year. Have you used up your contributions to the limit? If not, did you contribute as much as the company played?

For the 2022 tax year, the maximum 401(k) contribution is $20,500, with an additional $6,500 if you are 50 or older. The maximum contribution to an IRA is $6,000 and $1,000 if you are 50 or older. If you don’t want to run out of donations, at least consider increasing your annual contribution.

Don’t forget to pay attention to your assignment. Are you satisfied with the ratio of stocks, bonds and other assets, or do you need rebalancing?

Other employee benefits that can be reviewed and adjusted with financial experts include company stock options and other incentive plans (restricted stock, restricted compensation units, etc.); Provides health insurance, life and disability insurance, and flexible spending accounts (FSAs).

And don’t forget if you have a health care expense account. For the 2022 tax year, the maximum HSA contributions are $3,650 for individuals, $7,300 for families and an additional $1,000 for those over age 55.

Finally, are the beneficiaries up to date? Can I also designate a successor beneficiary? You work hard for the good of your employees, so let them go where you want them to be.

Review or update your payee designation.

Get the necessary information about the beneficiary’s bank accounts, retirement accounts, life insurance policies, and annuities.

Have you ever been married or had children within the last 12 months? Or a loved one may have left your life through divorce or death. Choosing a life insurance beneficiary is a decision you should consider carefully. This is because the beneficiary is more important than the person named in the will.

Write down the beneficiary’s name with an updated date to help you trace the beneficiary. Also, be sure to include the name of a temporary beneficiary in case your primary beneficiary dies. Beneficiaries can be individuals, charities, or nonprofit organizations.1 Keep this document in an accessible place and review it annually.

When you designate a beneficiary in a 401(k), you can choose more than one default beneficiary and assign a percentage of the asset. Have you worked at the same location for a long time? If so, familiarize yourself with the beneficiaries.

Being well organized is another way to make sure your beneficiaries come to them. Keep at least two life insurance records, preferably in and out of your home, in case of fire or flooding. And they should have lots of details (date, insurance number, amount of coverage for death, name of the agent who sold the policy, etc.). A good place to keep records in your home is financial records or legal documents. A second record should be kept in a safe place, with a trusted relative or professional. And after you’re gone, make sure your beneficiaries know where to find them.

Track the process of moving toward your goal.

How are you progressing toward your financial goals? You can use a financial checklist to take a close look at your most important financial aspects as well as the accounts you use.

For example, if you’re focused on saving for major expenses, look at your savings account balance to see how much you added in the last quarter. Are you ready to buy? If not, think about how to increase your savings in the next quarter.

Check your progress on paying off debt.

“How much debt is there compared to the beginning of the year? Congratulations, if you’ve made progress in steadily paying off your down payments, and if you’ve gone in the opposite direction, develop an action plan to pay off your debt over the next year.” McBride says.

To get closer to paying off your debt, Mr. McBride suggests finding additional sources of income, even if temporarily, and investing that money in debt. If you have credit card debt, consider offers to transfer the balance at 0% or other low interest rates, which can protect you from additional interest rate increases and help you pay off your debt in full.

Make sure you have adequate insurance.

Have you raised a family this year? Did you buy a home? Have you started your own business? The insurance you signed up for at the beginning of the year may not be enough for the New Year.

Make sure your life insurance properly protects your spouse and children and that you have adequate liability coverage for your home and car; depending on your assets, you may need general liability insurance. If you use your home or car for business, you may need additional coverage.

And if you’re giving up additional coverage, such as disability insurance, through your employer, make sure the decision is still in effect for you in 2023. If you quit your job of your own volition, you may need a disability policy to protect your family in case you can’t work.

Review your credit/debt.

Credit cards, loans and other forms of debt can have a place in your financial strategy if you balance your family’s other financial goals, including savings and investments. However, it’s important to make sure that the product you’re using fits your needs. The end of the year is a good time to review your credit situation and terms to get the best interest rates/conditions. Also, see how far you have come in paying off your debt. If not, is there a way to minimize your overall interest payments by prioritizing or consolidating high-interest debt?