Time for a 5-Point Year-End Personal Financial Review

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It seems like the older you get, the sooner the holidays creep in. While this may call for convivial gatherings and festive cocktail parties, the end of the year also suggests it’s time for some financial management.

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Don’t worry: conducting a year-end financial review may not be one of your most exciting plans for December, but it’s not difficult. Plus, you’ll be ready for a more prosperous 2023. Here are five key areas to check before the end of the year.

revise budget

It’s always a good idea to take a look at your budget every year. However, given the recent economic pressures Americans have faced amid inflation, it’s critical to make sure your budget can support spending next year.

Brian Greenberg, founder and CEO of Insurist, recommends listing your assets and liabilities first. Review your bank statements, credit card statements, investments, and any other documents that show how much money you have (and owe).

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

“This will help you figure out what percentage of your income goes toward things like rent or mortgage payments, utilities, food and clothing — anything else that isn’t considered an investment or savings account,” Greenberg said. .” Then compare the two numbers to see if there is anything that needs to be changed.

For example, if you spend more than 40 percent of your income on discretionary spending, you may want to consider putting more of your money into savings or retirement, says Greenberg. Now is a good time to redirect your money and create a better spending plan for 2023.

Review your health care costs

According to Ari Parker, author of “It’s Not That Complicated: Three Health Insurance Decisions to Protect Your Health and Your Money,” health care costs are one of the biggest recurring expenses people face each year. December can be a critical time to save money on medical expenses.

“If you’re retired and have a fixed income, saving money on medical expenses is one of the most effective ways to improve your financial situation in 2023,” Parker said. “My biggest advice is to take some time this month to assess how much you’re paying for doctor and specialist visits, prescription drug costs and any ancillary benefits like dental, vision and health care.”

You could be paying thousands of dollars on those bills alone, but Parker says you can save hundreds by evaluating whether you’re enrolled in the right health insurance plan. Use the open enrollment period to make any necessary changes.

Check Retirement Savings

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

“A survey conducted by TIAA earlier this year showed that only about one-third of American workers said they were very confident that they could retire when they wanted, afford the retirement lifestyle they wanted, or throughout the Live comfortably in retirement without running out of money,” said Jarrod Fowler, director of TIAA’s Investment and Advisory Center.

At a minimum, you should contribute enough to take advantage of any employer match, usually 3% to 5%.

“Discuss the different options for retirement savings with your human resources office and meet with a financial planner that many companies offer,” he says. “They can help customize the plan that’s best for you.”

Find tax opportunities

According to Ksenia Yudina, founder and CEO of investment app UNest, December tax-loss harvesting could be a good strategy. This involves selling stocks, ETFs, mutual funds, and other losing investments to offset capital gains from other high-performing investments.

“Since the stock market has fallen this year, a lot of investments have lost their value, so there are many opportunities to sell investments at a loss,” Yudina said. “If the investor has no capital gains to offset against in the year in which the capital loss is harvested, losses can be carried forward to offset future gains or future income – there is no maturity date.”

However, Yudina added that investors should be aware of the “wash sale” rules. This means that if you sell an investment at a loss for a tax deduction, you won’t be able to buy back the same investment within 60 days.

check yourself too

In the end, Yudina says it’s important to recognize and moderate any inner conflicts.

“Even the smartest financial resolutions can fall prey to nasty human emotions,” she says. “Impulse buying, especially around the holidays, can fill a temporary void, but may leave you feeling less than great in the new year.”

So make sure you take some time to relax, reflect and identify any spending triggers before they can affect you the most.

“Train yourself to focus on the ultimate goal of achieving financial independence for you and your kids,” she says. “Once you’re confident your priorities are clear, allocate a reasonable budget for holiday spending.”

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This article originally appeared on GOBankingRates.com: Time for a 5-Point Year-End Personal Finance Checkup

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