Year-end is a good time for a personal financial checkup. It is important to look at how you did during the year compared to your financial goals and expectations for the year. This can help you determine if your planning was on track and can help in formulating plans for the upcoming year, and with your overall longer-term financial planning.

Short-Term Financial Goals

 

These are goals for time periods ranging from a few months out to one or two years. This could include goals surrounding the amount contributed to retirement accounts, taxable investment accounts, savings goals, reducing spending, paying down debt or others.

Short-term goals are the “gateway” to achieving your long-term goals so it is important that you are on track with these goals.

Long-Term Goals

 

This is a good time to assess your progress towards your long-term goals and to make any adjustments to these goals going forward. Long-term goals are those that have multi-year time commitment to attain them. Examples might be saving for retirement, saving for your children’s college education, buying a home and a host of others.

Are you on track towards achieving your goal financially? Do you need to make any adjustments to your savings strategy? Does the goal need to be revised?

Assessing Income and Cash Flow

 

As we move into 2024, it is important to assess your anticipated income and cash flow for the coming year. Will anything be changing good or bad for next year? Were there any items that contributed to unusually higher or lower income and expenses this year? Will those items remain in place for the foreseeable future, or will things get back to normal next year?

Expenses and Budgeting

 

How much you spend in comparison to how much you make is the key determinant in your ability to save and invest to achieve your financial goals. Do you have a budget in place? How did your spending compare to your budget this year? Do you need to make any adjustments going into next year to be able to stay on track towards your financial goals?

This is the time to evaluate your spending and your budget to start the new year on the right track.

Tax Planning

 

A key financial task prior to year-end is to assess your estimated tax liability for the year. Is it in line with your expectations? Do you have enough set aside to cover any additional tax liability when you file taxes early next year?

Moreover, tax planning for next year is a critical part of your financial planning efforts. Are there steps you can take to reduce your tax liability? These might include:

●      Retirement plan contributions

●       Charitable contributions

●      Ensuring that you are capturing all deductions that you are entitled to

Savings and Investments

Did your savings for retirement and in general meet your expectations for the year? This is the time to determine your goals in these areas for next year and to have a strategy in place to maximize savings and to ensure that your investments are in line with your overall objectives and risk tolerance. Are you maxing out your retirement plan contributions?

In reviewing your investments, was performance in line with your expectations? Ideally, you will have a benchmark to compare your portfolio to. This might be an overall benchmark like the S&P 500, or a blended benchmark of several indexes tied to your portfolio’s asset allocation.

Your asset allocation is critical to investment success. Is the allocation still appropriate based on your progress towards your goals? Does your portfolio need to be rebalanced to be in line with your investment strategy? This is a good time to do that rebalancing. In the process, you might be able to harvest some tax losses that you can use to offset capital gains elsewhere and reduce your overall tax hit.

Also in the course of rebalancing, you might find yourself in a position to donate shares of appreciated assets like stocks, ETFs or mutual funds to a charity. The market value can be a deductible charitable contribution, and donating securities eliminates any capital gains taxes that would arise from selling appreciated shares held in a taxable account.

Credit and Debt Management

 

As you review your finances at year-end, be sure to check your credit scores. This number can impact rates on any loans needed in the future and is sometimes even considered when applying for a job. If there are issues, be sure to come up with a plan to correct any deficiencies causing these issues, such as late payments, etc.

Take a look at your debts to determine if you can pay any of these down quicker or if you can refinance any debts at a lower interest rate. Both will pay off in the long run.

Are there ways that you can save money in the new year? This involves reviewing your budget and spending, including credit cards. In many cases even a small reduction can free up money for other priorities that can be beneficial to your long-term planning.

Estate Planning

 

As part of your year-end review, be sure that your loved ones are covered in the event of your death. A will is the basic estate planning document; in some cases a trust or other types of planning may be appropriate.

Be sure all life insurance policies and retirement plan accounts have up-to-date beneficiary designations. This is especially important if you have recently experienced any life changes such as marriage, divorce, the death of a spouse or others.

Year-end is an excellent time to sit down with your Wedbush advisor to discuss your situation and to be sure that you are on the right path for 2024 and beyond.

Disclosure 

Wedbush Securities does not provide tax or legal advice. Please consult your tax or legal advisor. 

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.