6 Steps for a Simple Year-End Financial ReviewSubmitted by JMB Financial Managers on November 20th, 2019
It’s that time of year again! The days are shorter but that doesn’t mean there is any less to get done. As the end of the year quickly approaches, I wanted to take the time to share with you a bit of advice I give each of my clients this time every year.
Year-end is the best time to spend a few hours reviewing your finances, and it can really pay off. To help you do this, I’ve put together six simple steps to guide you through a simple year-end financial review.
1. Analyze Your Cash Flow
When your income is greater than your expenses, the excess is called a positive cash flow. When your expenses exceed your income, the shortfall is termed a negative cash flow. A positive cash flow means that you may have funds you can set aside as savings. A negative cash flow indicates that it may be time to reorganize your budget to minimize unnecessary expenses. If you need help evaluating your cash flow and planning for the year ahead, be sure to schedule a free consultation to discuss your situation.
2. Develop a Plan for Special Goals
For every financial and retirement goal you establish you need a plan. The planning process should go something like this: identify a projected cost, a timeline (how long it will take you to reach the goal), and a funding method (through savings, liquidating assets, or taking a loan).
Consider your goals in terms of priority. The bottom, or foundation tier, may include emergency funds to cover at least six months’ worth of living expenses. The middle tier may include essentials, such as your child’s education. Place less important goals, such as renovating your home or taking a vacation, on the top tier.
3. Boost Your Retirement Savings
Social Security and pensions may not provide sufficient income to maintain your current lifestyle in retirement. Therefore, it is essential to identify your retirement needs and place a disciplined savings program in place for the future. Maximize your contribution to your retirement accounts, and, if possible, make “catch-up” contributions.
4. Minimize Income Taxes
Consider taking advantage of all income tax deductions to which you are entitled and exploring other ways of reducing your income taxes. For instance, under appropriate circumstances, losses or expenses from prior years may be carried over to the next tax year. A qualified tax professional can help you implement a tax strategy that meets your needs.
5. Manage Unexpected Risk
Without warning, a disability or death can cause financial hardship for your family. Ample insurance coverage is an important foundation for your financial plan – it offers protection to help cover potential risk and liabilities. Don’t start the new year off on the wrong foot; now is the time to prepare for the future by managing unexpected risk.
6. Consult a Qualified Financial Planner
In today’s complex financial world, everyone needs help making informed decisions. Sound financial planning can help ensure that your current needs and long-term goals are on track. Schedule a free consultation with us to discuss how we can assist with your year-end financial review.