Year-End Financial Tasks

Written by Mark Davidson

A lot of readers will probably have set New Year's resolutions related to their finances, but it seems that taxes occupy a lot of the time allocated to these responsibilities during the first part of the year. And now that you've gotten through tax season, you're not necessarily thinking about some of those goals you committed to earlier.

To counter this effect, our personal "fiscal year" begins at the end of March. This means that the first part of the year was the last part of our previous year, and that is when the taxes get done. Taxes have to be filed, and everyone is under that deadline. But, this is an end of the year task rather than the item consuming all your energy at the beginning of the period. While this is simply a change of perspective, it allows us to address other critical items that tend to get dropped due to the effort required to complete tax preparation.

Account Review (At Least Annually)

Each quarter, I review our family investment accounts for their allocations, their holdings, and their performance. If there are changes to be made, such as selling a security or rebalancing assets in a retirement plan, I keep a short list of those for later execution. This task does not have to be very extensive, but it is important to review your accounts at least one time per year. Use this time as an opportunity to do so.

Statement of Net Worth

Every year, I review our family balance sheet in an effort to understand our assets and how they have grown (or not). There are some items where I use estimates, such as the value of our home, while others are pulled from various statements. I keep a spreadsheet from year-to-year for comparison.

Also, our level of emergency funds is reviewed at this time, especially relative to the potential needs for funds in the coming 12 months. Finally, this review provides the opportunity to review the debt we owe (and its terms) to ensure we do not have excessive risk and that we do have favorable rates.

Wills and Insurance

This item can be summarized by the following question: "Have there been any life changes in the last year that would necessitate a change to our wills or to our insurance contracts?" If the answer is yes, then also address the beneficiary information on any retirement account you have as well.

Credit Review and Credit Score

We recommend our clients review their credit reports at least annually so they are aware of any potential fraud occurring within their accounts. We also believe it is important that they know their credit scores so they can be informed buyers of credit. Pulling our credit is the final task on our annual checklist.

Record-keeping

Year-end is a great time to do this housekeeping as well. To learn about what paperwork is important to keep and what you can purge, please click here.

That's it… a few easy steps to better financial health, which can each be completed after your taxes are done. These enhance your financial position rather than depleting it. If, during the course of your work, you decide you need some assistance or a second opinion on your investments or other financial decisions, we encourage you to contact us at Cornerstone.

Watch a video of Mark on local television explaining budgeting for your household.

 

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