Your Essential Year-End Financial Checklist

December 11, 2019

Before you let the holidays take over completely, we’ve put together an essential year-end financial checklist to help you prepare for a fresh start to the new year. After all, you don’t want to waste money, incur penalties, or pay any more taxes than you absolutely have to.

Year-End Financial Checklist

1. Sit down for a 60-minute end of the year review.

With pen and paper in hand, (and your partner, if you have one), take time to look back at the past 12 months. Did you stay on your budget, or spend more than you had planned? Did you save more or less than what you hoped to? Were you able to pay off debt, or did unexpected expenses set you back? Be honest as you write down your answers. Even if there are some areas that need improving, whatever your situation, you can gain mastery over your money by committing to making those changes.

2. Do some financial planning for any large expenses coming up in the next 6-12 months.

Are you expecting a major life change such as marriage, divorce, birth, college, or starting a small business? Is there dental work or a big medical procedure on the horizon? Or, maybe your home needs repairs. Or you need a more reliable car. Whatever your financial situation, when it comes to paying for large expenses, you have options: saving up the cash, taking out a personal loan, using a credit card, refinancing your existing car loan, and more. Just be sure you do it without hurting your finances. Take on new debt only if you can fit the monthly payments into your budget. And do your research to find the best terms and lowest rates possible.

3. Get a jump on your tax return.

On December 31, your personal tax year is over. Grab a large envelope, accordion file, or box, and gather your year-end bank statements, tax documents and receipts. Employers typically mail W2s and 1099s in January. If you collected unemployment insurance, the state sends form 1099-G. Your lender will send form 1098-E if you paid student loan interest. Make sure all these institutions have your current address, and check the IRS website for more recommendations. Review last year’s tax return and tax bracket. If you start preparing now, come tax season you’ll feel less stressed, be ready ahead of time and avoid those late filing fees.

4. Revisit your tax withholding.

Changes in dependents, income and marital status can all affect your tax bill. Use the IRS’s tax withholding calculator to decide how much you want withheld from your take home pay next year. If you find saving on your own difficult to do, having more taxes withheld from your paycheck could mean a bigger tax refund (a savings windfall) come April. On the other hand, if you’re in debt and got a big tax refund last year, consider having less money withheld and use that cash to pay off your debt faster.

5. Use the money in your flexible spending account (FSA).

A flexible spending account allows you to set aside pre-tax money to pay for health care or dependent care expenses not covered by your health plan. If you have unspent money left in the account, find out the deadline for using it, or ask your employer if they permit balance carryovers into the following year. While you’re at it, reevaluate how much you want to set aside next year.

6. Contribute to a health savings account (HSA).

If you’re on a high-deductible health plan (HDHP) and are not enrolled in Medicare, you may qualify to make tax-free contributions (up to a maximum amount) to a health savings account to pay for medical expenses and lower your taxable income. The money in the account can be invested tax-free, and if you use it for qualified medical expenses you won’t ever owe any taxes on it.

7. Consider charitable donations as holiday gifts.

Many charities and non-profits see their biggest fundraising dollars come in at the end of the year. And for good reason. Making a charitable contribution in a loved one’s name can make a great holiday gift. And if you itemize expenses on your tax return, your charitable contribution may be deductible. Gather your receipts so you’re ready when April rolls around.

8. Review your Social Security benefits.

Even if you’re under 60, it’s a good idea to set up an online account with the Social Security Administration now. Not only will you receive personalized information about projected retirement benefits (or what you’d receive if you became disabled), it’s cool to see what you’ve earned over your lifetime on one page. Knowing what your benefit could be will help you with retirement planning. Whatever benefits you do receive will depend on what you’ve paid social security tax on. So make it a habit to revisit your account at least once a year and correct any mistakes.

9. Review your designated beneficiaries.

When you apply for life insurance, 401(k), IRA, and even some non-retirement accounts, you will be asked to name one or more beneficiaries. A beneficiary is the legal name of person(s) you designate to inherit the proceeds from your accounts upon your death. Many people don’t realize that a will (if they have one) does not control who receives all of their assets when they pass away. So not naming beneficiaries when you’re asked to could mean your money gets tied up in probate (a big hassle) for months or years. Know the critical mistakes to avoid when naming beneficiaries.

10. Get a free copy of your credit report.

You’re entitled to one free copy of your credit report from each bureau, every year. The Federal Trade Commission (FTC) website explains your right to a credit report and provides contact information for their authorized vendor. Once you’ve got your report in hand, carefully review it and correct any errors.

11. Make a financial New Year’s resolution.

Every new year presents a fresh, new beginning. What are your financial goals? Will you finally pay down your credit card debt, or improve your credit score? How much would you like to see in your emergency fund in six or 12 months from today? Maybe you’d like to get some retirement planning advice or investment advice from a financial advisor. Or maybe you want to diversify your existing portfolio, or start investing for the first time (even if it’s just a small amount). Whatever your financial goals, write them down, create some milestones, and think positive.

The Bottom Line

When you take time at the end of the year to look back at how far you’ve come, and what steps you still need to take to plan ahead for a healthy financial future—you’ll feel more in control of your money and your life.

Remember, it’s always a good idea to consult with a licensed tax professional for answers and advice about questions related to your specific tax and/or financial situation. LendingClub does not provide tax advice.

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