End of Year Financial Checklist

End of Year Financial Checklist

Joseph Darby

Your six-step end of year checklist

As the weather warms, the beach and barbeque are hopefully calling your name. Although, something else worth spending a little time and attention on during the holiday season is your finances.

Just like your physical health, your financial health needs a check-up at least annually.

As this year begins to wind down, take some time to check in on your financial wellbeing. Review the important items listed below to maintain or improve your financial wellness for the coming year and beyond.

1. Year-End Financial Review

A great place to begin is by looking back over the year and assessing how well you stuck to your financial plans. If you have a spouse or partner, be sure to include them in these discussions!

Remember, no one but you is grading how well you did this year, so be honest. Then, you can identify what does and doesn't work so you can keep moving forward.

As you consider the questions below, don’t just jot down a yes or no answer; also include reasons for why or why not.

  1. Did you stick to a budget or ‘pay yourself first’ plan?
  2. Was a single financial mission at the forefront of your mind when making decisions this year?
  3. If you got a raise or came into some extra cash, did you avoid lifestyle creep?
  4. Were you able to maintain your investment approach throughout the downturn this year? (hint: those that did were rewarded!)

Even if something bad happened over the past year, upon reflection this could become constructive.

  • Lose your job? – maybe you were in a vulnerable role and this could present an opportunity to branch into a more robust career, if you haven’t already?
  • Poor health? – what a great reminder of the need to take care of your body and mind.

2. Check and Track

If something gets measured, it gets improved. Spend a moment or two updating the following:

  1. Update your net worth. Is it trending in the right direction? Are you nearing your goal of debt-freedom or financial independence?
  2. Check your credit score. Review your credit report for accuracy – this can be performed free online.
  3. Check your investments. Having a complete understanding of your investments is a wise move.
  4. Understand any lending or debts. If you’re repaying a mortgage or other debt, refresh yourself with key matters such as the loan term, repayments, and interest rates.
  5. Review your emergency fund. The uncertainty of recent years has reinforced a key aspect of financial planning – be ready for the unexpected. A part of this is the importance of an emergency fund. Many financial experts suggest 3-6 months of expenses saved, though individual needs will vary. For example, you may have elderly parents overseas and want to have enough set aside so that you can get on a plane to see them for a few weeks at no-notice.
  6. Audit your insurance needs. Hand-in-hand with your emergency fund is insurance policies: they both reduce and mitigate risks. If you can’t bear the thought of spending a part of your summer reviewing this right now, then plot a firm calendar reminder to do it within the next two months! Having too little of cover leaves you open to financial devastation however, as life circumstances change, you may not need as much as you previously did. Review all your coverage, including:
  7. General insurance policies such as house, car, boat
  8. Personal insurance policies, including life, income, trauma, and health
  9. Any other cover you might have, such as for the key person in a small business
  10. Estate planning. Do you need to make any updates to your will, powers of attorney, or other important documents?
  11. “In case of emergency” folder or cloud-based file. If you don’t already have one, many people get a great deal of comfort from a collated record of insurance policies, wills, and other important documents. Technology means a backup can be securely held online.

3. Taxes

Spare a little thought for the approaching end of the financial and tax year: 31 March. This could include:

  1. Making a note of any insurance policies that may offer tax benefits.
  2. Considering if a Trust or other strategy may be worthwhile.
  3. In case you didn’t already know, charitable donations are tax deductible – that is, you can get 33.33 cents on the dollar back from the Inland Revenue, New Zealand’s tax collectors. Even so, most people never get around to making a claim, which can be done simply online.

4. Dream Big, What Can Be Improved for the New Year?

With a new financial health baseline and year-end financial tasks checked off your list, it is time to think open-mindedly about the approaching year.

  • Will this be the year you buy your first home, a second property, purchase a new vehicle, update your kitchen, or get braces for your teeth?
  • Do you want to become debt-free? Boost your emergency fund to a half-year of expenses? Create an estate plan?
  • Maybe you’d like to help your adult kids into their first home, or work towards retiring earlier than you’d originally thought?

Whatever your phase of life, your answers to the examples of questions above are key before your thoughts turn toward…

5. Anticipate Change, Then Create Goals

“Dreams without goals are just dreams” – Denzel Washington

Think ahead to any significant life changes you anticipate in the next year or two, such as marriage or moving in with a significant other, divorce, birth or adoption, college, a career change, moving to a new location, starting a “side hustle” or even fulltime entrepreneurship.

Expecting these or other major life events are best done with some financial planning. You might want to speak with a financial professional or hire a money coach for guidance.

If that’s not for you, then once you identify your financial goals, make sure you write them down, and create some milestones to help motivate and keep you on track. Make sure to do this with your family to ensure any new money goals are keeping within it – and to address any new circumstances.

Be realistic and practical about your goals.

6. Implement Practical Steps to Make This Your Year

‘Rome wasn’t built in a day’, it was built brick by brick, so now is the time to lay some bricks of your own.

Update your budget and pay off bad debts. Get these basics done before turning to anything else.

Eliminate financial rip-offs. It seems that the number of financial rip-offs in New Zealand is steadily declining as regulations and laws crack down on the sharks out there. Nevertheless, there’s still a few financial rip-offs out there to eliminate.

Earnings. Earning is the key to building wealth. This might be your year to change career paths, enrol in higher education, push for promotion, or start your own business.

Invest for Life’s Major Goals

  • Following a spending plan can help you allocate funds to your most important financial goals before you spend on anything else.
  • Get to work any savings lying around – interest rates are chronically low, and most pundits think they are likely to stay that way!
  • In financial circles, “asset allocation” is the term given to the mix of investments to suit a person and their goals. Reviewing your own asset allocation could be as simple as checking and updating KiwiSaver Scheme fund choice. For those who have built up a bit more wealth, there could be a lot more to it.

Lending. The lending (including mortgage) environment is perhaps the most interesting it’s ever been. The all-time low interest rates are just one factor – banks and other lenders are adopting interesting approaches to different situations such as first home buyers, existing homeowners, and investors. This means it might be a great time for you to adjust your mortgage to suit you, or even consider property investment.

Manage risk. A proper insurance review is a detailed process, especially as the risks of missing something are so high! In summary, address and contact info will need checking, and other updates might be needed for things like:

  1. Personal insurance policies:
  2. Life changes, getting married, starting a family, a death in the family.
  3. Changes in health, perhaps you gave up smoking?
  4. Some policies might need reducing as you build more assets and repay debt such as a home mortgage.
  5. Change in occupation.
  6. General types of insurance.
  7. For household and contents insurance, changes might include home occupants, renovations, the fitting of an alarm, or if the property is partly used for Airbnb.
  8. Vehicle drivers might want to check any changes to driving history, sum insured, a repaid car loan, and so on.

Related material:

The Bottom Line – Your End of Year Financial Checklist

Just like anything, your financial house needs constant upkeep.

With the approach of summer and thoughts turning to a happy and healthy new year, what better time is there for a review of your financial wellness?

If you'd like to discuss your investments and overall financial situation with a trained professional, then get in touch.

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