Personal Finance

It’s Time for Your 5-Point End-of-Year Personal Finance Checkup

Mature woman is checking her finances at home.

Eva-Katalin / Getty Images

It seems like the older you get, the faster the holiday season sneaks up on you. While that might entail joyful get-togethers and festive cocktails, the end of the year also signals that it’s time to do some financial housekeeping. 

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Don’t worry: Performing a year-end personal finance check-up might not be among your most exciting plans in December, but it’s not difficult to do. Plus, you’ll set yourself up for a more prosperous 2023. Here are five key areas to check up on before the end of the year.

Revise Your Budget

Taking a look at your budget each year is always a good idea. However, considering the economic strain Americans have faced lately amid inflation, it’s crucial to make sure your budget can support your spending going into next year.

Brian Greenberg, founder and CEO of Insurist, suggested making a list of your assets and liabilities first. Go through your bank statements, credit card statements, investments and any other documents that show how much money you have (and how much you owe). 

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Next, figure out how much money you have left over after paying all of your bills.

“This will help you figure out what percentage of your income goes toward expenses like rent or mortgage payments, utilities, food and clothing costs — anything else that isn’t considered an investment or savings account,” Greenberg said. Then compare these two numbers and see whether anything needs changing.

For example, Greenberg said, if you’re spending more than 40% of your income on discretionary expenses, you might want to consider funneling more money for savings or retirement instead. Now is a great time to adjust where your money is going and come up with a better spending plan for 2023.

Review Your Healthcare Costs

Healthcare costs are one of the largest recurring expenses people face each year, according to Ari Parker, author of “It’s Not That Complicated: The Three Medicare Decisions to Protect Your Health and Money.” December can be a critical time to find healthcare savings. 

“If you are retired and on a fixed income, saving on medical bills is one of the most efficient ways to improve your financial situation in 2023,” Parker said. “My biggest tip is to take the time this month to evaluate how much you pay for doctor and specialist visits, prescription drug costs, and any ancillary benefits like dental, vision and healthcare.” 

It’s possible that you’re paying thousands of dollars on these bills alone, but Parker said you can find hundreds of dollars in savings by evaluating whether you are on the right health insurance plan. Take advantage of open enrollment periods to make any necessary changes.

Examine Retirement Savings

Another key area to review at year end is your retirement savings.

“TIAA did a survey earlier this year that showed only about a third of American workers say they’re very confident they’re on track to retire when they want, afford the lifestyle they want in retirement or live comfortably throughout retirement without running out of money,” said Jarrod Fowler, head of TIAA‘s Investment and Advisory Center. 

At the very least, you should be contributing enough to take full advantage of any employer match, which is typically 3% to 5%.

“Talk to your HR office about different options for retirement savings and meet with a financial planner, which many companies provide,” he said. “They can help tailor a plan that works best for you.”

Look for Tax-Loss Harvesting Opportunities

Tax-loss harvesting can be a great strategy in December, according to Ksenia Yudina, CFA, founder and CEO of investing app UNest. This involves selling stocks, ETFs, mutual funds and other investments carrying losses to offset capital gains from other high-performing investments. 

“Since the equity market was down this year and a lot of investments lost value, there are a lot of opportunities to sell investments at a loss,” Yudina said. “If an investor has no capital gains to offset in the year the capital loss was harvested, the loss can be carried over to offset future gains or future income — there is no expiration date.” 

However, Yudina added that investors should be aware of the “wash sale” rule. This states that if you sell an investment at a loss for tax-loss harvesting, you can’t buy back the same investment for 60 days.

Check In on Yourself, Too

Finally, Yudina said it’s important to recognize and moderate any inner conflicts.

“Even the most sensible financial resolution can fall victim to pesky human emotions,” she said. “Impulse buys, particularly around the holidays, can fill a temporary hole but will likely make you feel less than stellar in the New Year.”

So make sure you take some time to relax, reflect and identify any spending triggers before they get the best of you.

“Train yourself to stay focused on the end goal of financial independence for you and your kids,” she said. “Once you are confident that you have your priorities straight, allocate a sensible budget for holiday spending.”

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