The new year is the perfect time to do a financial check-up. This is beneficial for ensuring that you are going in the right direction with your savings and spending habits. It gives you the chance to review how you have done financially over the past twelve months and make adjustments for the months ahead. The new year is the perfect time to check in so you can take advantage of new tax-saving strategies. Throughout this article, we will go over some critical steps to consider when planning your fiscal check-up!
Set Goals
First, it is wise to evaluate your financial goals. Assess your progress on your previous goals and see where you stand. If you fell short, see if you can figure out why. Strategize a new plan to meet these goals in the new year. After taking these steps, be sure to revise your goals and write out the steps you need to take to accomplish them.
Next, take into consideration what new goals you would like to set. For example, you might want to add money to your emergency fund or max out your 401(k) at work. Establish clear goals and break down the steps you will need to take each month, quarter, and year to reach them.
See if Anything Has Changed in Your Life
Your financial situation might have changed in the past year, and you might anticipate significant changes in the near future. Life events such as a career change, adding to your family, retiring, buying a home, or getting married can all significantly alter your lifestyle and income. Whatever changes 2021 brought, you may need to adjust your financial planning to match that. Take time to plan for any changes in advance. Doing so will make your transition into the new year much smoother.
Evaluate Your Investments
Review the return on your investments, be it your stocks, bonds, or mutual funds. Are you happy with its performance? If not, it might be time to correct to a different course of action or consult with your financial advisor. The end of the year is also an excellent time to harvest tax losses. Doing so allows you to offset any capital gains on your investments with losses stemming from under-performing investments.
Reduce Income Taxes
It is never too early to start planning for next year's tax cycle. Check into what you can do to minimize the amount you owe Uncle Sam at the end of the year. Review your list of allowable deductions and be sure to take advantage of the ones you are eligible for. Consider combining deductions into one year or accelerating them by paying tax-deductible items off early.
Check Your Retirement Plans
Lastly, review how you are doing regarding your retirement funds. Are you maxing out your 401(k)? If your employer doesn't offer a 401(k), check if they offer you any alternatives. If not, investigate setting up your own IRA. In addition, check into whether or not your company offers a Health Savings Account. An HSA is an excellent way to save for future health care expenses on a tax-advantaged basis.
The New Year brings new hope and opportunities. However, it also brings with it new challenges. Doing a financial check-up is key to ensuring that your finances are stable going into the New Year. If they prove to be unstable, it is not too late to make changes to better your financial standings. Overall, the new year is an opportunity for a fresh start, so be optimistic about the future. No matter what happens this upcoming year, ALLIANCE Credit Union has got you covered! If you need any assistance managing your finances, don't be afraid to visit us in-branch or check out our website to see if we can assist you!
