YEAR-END FINANCIAL PLANNING

Scott Kahan |

As the year comes to a close, it’s an ideal time to assess your financial health, make strategic adjustments, and plan for a prosperous new year. Year-end financial planning allows you to review your financial progress, optimize your tax situation, and set yourself up for success in the coming year. Here’s a guide to effective year-end financial planning.

1. REVIEW YOUR FINANCIAL GOALS:

Start by reviewing the financial goals you set at the beginning of the year. Did you achieve what you planned? Assess any shortfalls, achievements, and necessary adjustments. Whether your goals were to save a certain amount, reduce debt, or invest, this reflection can help you identify what worked well and what needs improvement.

2. MAXIMIZE TAX-ADVANTAGED ACCOUNTS:

Now is the time to make any last-minute contributions to tax-advantaged accounts, like your 401(k), IRA, or Health Savings Account (HSA). Contributions to these accounts can reduce your taxable income for the year, potentially lowering your tax bill.

3. EVALUATE YOUR INVESTMENT PORTFOLIO:

A year-end portfolio review helps ensure your investments are still aligned with your financial goals and risk tolerance. Consider rebalancing your portfolio by adjusting the percentages allocated to different assets (stocks, bonds, etc.) This is especially important aftermarket fluctuations, as your risk profile may have shifted. A balanced portfolio can help manage risk and keep you on track for long-term growth.

4. HARVEST TAX LOSSES AND GAINS:

Tax-loss harvesting is a strategy where you sell investments that have declined in value to offset gains from profitable investments, thereby reducing your taxable income. This can be especially beneficial if you had significant capital gains during the year. Make sure you comply with IRS wash-sale rules, which prevent you from repurchasing the same or a “substantially identical” security within 30 days. Tax-gain harvesting, selling appreciated assets to lock in gains at a lower tax rate, can also be beneficial, especially if you’re in a low tax bracket.

5. PLAN FOR CHARITABLE GIVING:

If you plan to donate to charity, doing so before the end of the year can be advantageous for both the cause and your taxes. Donating appreciated assets, such as stocks, is particularly tax-efficient, as you can avoid paying capital gains taxes while still receiving a deduction for the full value

6. REVIEW AND USE FLEXIBLE SPENDING ACCOUNTS (FSAS):

Unlike Health Savings Accounts, Flexible Spending Accounts (FSAs) funds often have a “use it or lose it” rule, meaning unspent funds may not roll over to the next year. If you have leftover funds, check with your employer to confirm the deadline and consider making eligible purchases, like prescription medications or medical supplies.

7. PLAN FOR NEXT YEAR’S BUDGET:

Review your spending habits and make adjustments for the coming year. Evaluate areas where you might be overspending and consider reallocating funds to savings or investment accounts. A strong budget will keep you financially disciplined and ready to tackle future goals.

8. MEET WITH A FINANCIAL ADVISOR:

Year-end is a great time to connect with a financial advisor, especially if your finances have become more complex. Advisors can guide you in planning your taxes, investing strategies, and setting financial goals tailored to your situation. Here at Financial Asset Management Corporation (FAM), we are available for an introductory free consultation.


CONCLUSION: Year-end financial planning helps you maximize tax savings, refine your investment strategy, and ensure your financial goals remain on track. By taking a few proactive steps now, you can start the new year with confidence and a stronger financial foundation.

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