As we come to the end of 2021, it’s time for you to do your year-end financial checklist and make sure you end the year on a high. No doubt, it’s been a tough year. But with businesses resuming operations slowly and life seemingly getting back to normal, things are looking up. That’s why it makes it all the more important to review the year that went by, take a few crucial financial decisions, and make sure you start 2022 well.
Evaluate and restructure your investments
Given that most businesses have suffered greatly over the past two years, evaluating your investment portfolio should be your top priority. If you’ve invested in shares that are making losses and don’t look like they will recover anytime in the foreseeable future, you should perhaps consider selling them off.
Losing money on investments is not ideal, but there is a silver lining too. You can adjust your losses against any capital gains you have made on shares in the past year or on ordinary income of up to $3,000.
That said, take a look at your stocks and see what the overall risk of your current portfolio is. Has it increased since you last checked? Is the risk level above what you’re comfortable with? Talk to an investment advisor and restructure your portfolio to reduce your risk and maximize your returns. Year-end financial checklist 1–done!
Maximize your tax deductions
Take the last few days of the year to see what tax deductions you still have left to claim and reduce your tax dues. There are a number of deductions available to both businesses as well as individuals. Talk to a tax expert or a financial advisor to know what options are still available to you.
Contribute maximum to retirement
Planning for your retirement is important. The earlier you start on your second item on your year-end financial checklist, the better. If you have retirement account options such as IRAs or 401(k)s, make sure you contribute the maximum possible amounts for next year. If your employer offers matching contributions, this gets even better.
It may seem weird to plan for your retirement early on in your career. But it’s important to have a solid plan in place so that you build your next egg systematically over time. If done right, you can have enough stashed away to retire comfortably and be sure that your fund will cover all your expenses.
Budget for 2022
Learning to create budgets for yourself is a vital financial skill. If you don’t already know how to do it, you should get started and create a budget for 2022. There are plenty of websites and mobile app that can help you create detailed budgets for your expenses. If you like doing it the old-school way, you can create a spreadsheet as well.
Creating a budget gives your money a framework to operate in. You will know exactly how much money is coming in and how much is going out. You will have complete transparency on where and how your money is being spent as well. It helps you track your spending and reduce unwanted expenses.
Set financial goals for next year
Setting financial goals for yourself is the best way to make sure that you improve your relationship with money. As you enter 2022, set your goals for the year now itself. Set both long-term as well as short-term goals. A long-term goal can be divided into multiple short-term goals. This will help you achieve your target in a systematic manner.
What is your financial vision for the new year? How do you want your finances to look at the end of 2022? How much do you want to save next year? Do you have an emergency fund? If not, start creating one right away. That could be one of your goals for 2022.
Divide your expenses into needs and wants. Needs are all the basic expenses that are required for living. This includes rent, food, utilities, etc. Wants are expenses over and above your needs. For example, buying a car, getting the latest gadget, dining out regularly, etc.
Write down your needs and wants. Cutting down on your wants is a great way to save money. Of course, you can indulge once in a while. But writing them down can help you have better control over your finances.