Your Year-End Financial Checklist for 2020

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J. Kelly Brito | Unsplash

To put it bluntly, this year has been terrible. We’d all like to put 2020 behind us as soon as possible, but there is some housekeeping to do before the end of the year. It’s vital to evaluate your financial situation regularly, and the year’s end is a neat, easy time to do so. This year in particular, when many Americans have lost income, it’s critical we take stock of our individual financial situations and plan for the future. If you’re looking for a place to start, here’s a simple end-of-year financial checklist to make sure your finances are in order.

1. Make (or Review) Your Budget

When evaluating or setting any financial goals, everything starts with a budget. Budgeting is the most effective way of tracking and managing your money and ensuring everything goes where it needs to go. Even if you’ve never budgeted before, this month is a great time to start. There are plenty of programs like Truebill and EveryDollar that help automate the process, or you can make a budget spreadsheet yourself.

If you’re already a budgeting expert, the end of the year is a natural and easy time to evaluate how you stacked up this year. Even if you’ve struggled financially, knowing the precise challenges that you face is half the battle. Budgeting can help you do that, and stay on top of the ball.

2. Evaluate Your Retirement 

If you work at a company that offers 401(k) matching, you’ll want to make the most of it by the end of the year. Whatever the maximum your company will match is, try to contribute at least that much – it’s one of the closest things available to free money. 401(k) contributions reset after the new year, so you have until December 31st to max out your contribution and match.

You can contribute to IRAs through the end of the tax year, but that doesn’t mean you should ignore IRA contributions of the calendar year either. Some financial planners recommend converting from a traditional IRA, where you contribute pre-tax dollars, to a Roth IRA, where you contribute taxed money. The move can be particularly beneficial for anyone who has suffered a loss in income this year, but it’s best to consult an advisor about your specific situation.

See Also: IRA vs 401(k): Everything You Need to Know

3. Tackle Debt

Consumer debt hit all-time highs this year as millions of Americans lost work and the economy came to a screeching halt. There’s no cure-all to debt, but the best thing you can do is tackle it head-on, as soon as you can. The longer you sit on debt without taking action, the more it’ll grow.

Non-profit credit counseling is a great way to get low-cost advice and guidance on how to handle your debt. Most non-profit counseling services offer some form of debt management as well as more specific counseling, like for student debt. You can also utilize tactics like the debt snowball or debt avalanche to build your own plan to become debt-free. While your problems won’t be solved by January, taking the first steps toward eradicating your debt is the most important.

4. Prep for the Holidays

Regardless of your financial situation, the end of the year can get a bit expensive between holiday gifts, meals, and plans. It’s a good idea then to completely separate your holiday spending from your typical expenses to get a clear sense of exactly how much you spent. It’ll take a bit of work to get everything planned and budgeted, but you’ll thank yourself when you don’t need to stress about your shopping expenses in January.

This number can also help serve as a benchmark for future years, ensuring you don’t end up overspending.

5. Review Your Credit Score

In a typical year, you can only get one free credit report from each of the three major credit bureaus. Because of the coronavirus pandemic, you can get free scores from Experian, TransUnion, and Equifax each week through April 2021. If you’re not someone who pays close attention to your credit report, now is a great opportunity to really dig into the factors impacting your credit, and find ways to boost your score.

6. Get Your Estate in Order

This tip is valuable advice for anyone even if you feel healthy. The end of the year is a great time to look toward the future, and in financial planning that also means thinking about death. If you don’t already have a will, consider writing one. If you already have one, now is a great time to look it over. In addition, it’s a good idea to check and update your insurance beneficiaries, if needed. It’s all a bit morbid to think about, but ultimately the responsible financial decision.