Home / News / Columns / End of the year is a good time for a financial review and tune-up

End of the year is a good time for a financial review and tune-up

People who are home with a little free time between now and the end of the year may want to get a handle on personal finances for 2021. CBN News made these recommendations to help ensure a strong financial start to the new year.

Organize financial records. This could involve downloading your online account statements and gathering all your personal income records into one place. Stash stubs, receipts for any tax-deductible payments, and IRS forms in a separate folder. Then when tax time comes, you do not have to go searching for all this information.

Review taxable investments. If you have losses, take advantage of the government’s subsidy by selling the losers. You get to reduce any capital gains for the year by the losses, and if you have any remaining net losses, they can be used to reduce your taxable income by up to $3,000. When deciding what to sell, look at your overall asset allocation and use this opportunity to rebalance your portfolio. Asset allocation works best with occasional rebalancing, because not all assets move at the same rate or in the same direction.

Review your retirement plan. If you make this move early enough, you still may be able to increase your salary deductions to make up for any shortfall below the maximum. Not only that, but it generally is more efficient to use the extra cash to rebalance your portfolio when you do not have any losses to harvest.

Check on liquid cash reserves. In these uncertain economic times, make sure you have one to two years of living expenses set aside in savings. If you do not have this amount saved, begin building your reserves by watching holiday spending, avoiding consumer debt and even revising your lifestyle.

Go over expenses for the past year. The better handle you have on your spending habits, the better you can plan your saving and make needed changes to save more. Make a list of all revolving debt balances you carry. Try to make more than the minimum payments on any consumer debt to reduce the amount subject to interest. Ask the lender for a lower rate if you have been paying on time. Check your credit score and read your credit report

Review insurance coverage. Make sure you have adequate life, health, disability, long-term care and homeowner’s insurance, all of which can help protect you from a financial calamity.

Look over estate planning documents. Examine your wills, trusts, etc. to make sure they reflect your recent wishes and desires. You never know when they will go into effect.

Review your financial plan. See if you need to make any modifications based on changes in your circumstances. If you do not have a plan, now is a good time to put one together.

Calculate your net worth to see if your wealth has been increasing. If it has, reward yourself for a job well done with a visit to your favorite restaurant Then enjoy a very Happy New Year.

–Alan  Goforth | Metro Voice