The end of each year is the perfect time for reflection on the status of the resolutions and goals you made at the start. As 2024 draws to a close, assessing your financial situation and plan for the upcoming year should be on your to do list. Year-end planning is a critical component of trying to maximize your current financial position and strategizing to achieve your future goals. I’ve laid out some important steps to prepare your finances as the clock counts down to 2025.
Review Your Financial Goals
Start by looking back at the financial goals you set at beginning of the year. Which goals did you achieve? Where did you fall short? Some common areas to review include the status of your savings targets and progress on paying down debt. Evaluating where you stand can help provide clarity on what worked and what didn’t, allowing you to set realistic goals for the coming year.
Budget Needs to Budge?
The next piece to the year-end planning puzzle is looking at your budget to determine if it still aligns with your current financial situation. Honestly evaluate your spending patterns and identify areas where you may have spent (or saved) more than anticipated. Take this opportunity to update your budget to reflect any changes you may have seen to your income or expenses—maybe a raise or promotion that you received this year, or an increase to regular expenses such as property taxes or childcare. Use all of this intel as a guideline to set realistic financial goals for the new year.
Optimize Tax Strategies
With a limited window remaining to impact your tax status for 2024, the end of the year is an ideal time to consider your tax situation:
- Tax-Deferred Accounts: If you can, maximize contributions to tax-advantaged accounts like IRAs and 401(k)s before the year ends. Not only do these contributions reduce your taxable income, but they can also help secure your financial future.
- Tax-Loss Harvesting: If you have investments that have lost value, consider selling them to offset gains from other investments. This strategy can lower your taxable income, but be sure to consult with your financial advisor and tax professional to devise a plan that works best for your financial picture.
- Charitable Donations: If you’re inclined to give, consider making charitable contributions before year end. This not only supports causes you care about, but may also provide you with a 2024 tax deduction. Learn more about planning your year-end charitable giving here.
Insurance Policies Overview
Make sure to take the time before the new year begins to review your insurance policies, including health, auto, home, and life insurance. Your coverage needs can change over time and premium increases can creep up on you, especially for home and auto policies. There’s nothing wrong with making changes to your current policies, and a conversation with your financial advisor and insurance broker can help you evaluate your needs and coverage, especially if your life circumstances have changed.
Master Your Spending
Try to anticipate any significant upcoming expenses that you already have a pulse on for the coming year. This could include planned home improvement projects, trips or celebrations, expanding your family, property taxes, and insurance premiums. Setting aside funds in a dedicated savings account to ensure you’re prepared when these expenses hit is a smart way to turn spending into saving. In addition to anticipating these expenses, make sure you’re saving funds for short-term needs in the types of accounts that are best suited to your needs, such as a high-yield savings account or cash management account.
Goalsetting for the Year Ahead
Paying down debts and reassessing your savings plan should not be forgotten. If you have outstanding debts, take this time to think about your current repayment strategy. Consider prioritizing high-interest debt to save on interest costs. Additionally, explore options for consolidating debts if it aligns with your goals. Aim to build or enhance your emergency savings fund, so those rainy days don’t have to feel so dark. Having a financial cushion in place can provide peace of mind and protection from unexpected expenses.
Seek Help from a Financial Professional
The good news is you don’t have to tackle year-end planning on your own. If your financial situation is complex or you’re unsure about the best strategies for you, consider consulting with a financial advisor. They can offer personalized advice and help you develop a comprehensive financial plan tailored to your goals.
Reflect, Meditate, & Celebrate
And finally, take a moment to truly reflect on your financial journey over the past year. Celebrate your successes, no matter how “small” you may think they are. Reaching any financial goal is something to be proud of. On the other hand, use any setbacks as learning experiences. This mindset will empower you as you move forward productively into the new year.
Year-end financial planning is an essential practice that can help you assess your current situation, optimize your tax position, and prepare for future financial goals. By being proactive, you can set yourself up for a successful year ahead. Remember, an important element of financial wellness is continuous evaluation and adaptation to align your financial strategy with your evolving needs and goals. If you take the time to do this, you’ll be starting 2025 on a strong note.
The opinions and analyses expressed in the article are based on Curi RMB Capital, LLC's research and professional experience. The information and data in this article do not constitute legal, tax, accounting, investment or other professional advice. Investors should consult with their trusted professionals prior to taking any action.
The content contained herein was generated by Curi RMB Capital with the assistance of an AI-based system to augment the effort.
Investments & Wealth Institute (The Institute) is the owner of the certification marks “CPWA,” and “Certified Private Wealth Advisor.” Use of CPWA, and/or Certified Private Wealth Advisor signifies that the user has successfully completed The Institute’s initial and ongoing credentialing requirements for investment management professionals.
Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
