15 Year-End Financial Planning Strategies

By Barbara O’Neill, Ph.D., CFP®, Rutgers Cooperative Extension, [email protected]

The end of one year and start of another is a great time to assess your personal finances and take action to improve your net worth and overall financial well-being.  Not sure how to get started?  Consider these tips:

1. Plan to Play Catch Up- Make a 2019 contribution to an individual retirement account or SEP-IRA, if self-employed. There is still time.  You have until the 2019 income tax filing deadline in April 2020 to do so. 
2. Calculate Net Worth- Add up the total of your debts and subtract it from the total of your assets. A net worth statement provides a “snapshot” of your financial situation and a benchmark to measure progress.
3. Check Your Credit Report- Request one free credit report annually from each of the three major credit bureaus: Experian, Equifax, and TransUnion. Check them carefully for errors and evidence of identity theft.
4. Calculate Your Debt-to-Income Ratio- Divide monthly consumer debt payments (excluding a mortgage) by monthly take-home pay. If the ratio is greater than 15%, do not take on any new credit obligations.
5. Review Your Insurance Coverage- Contact your insurance agent to review current and future insurance policy needs and available cost-saving strategies (e.g., policy discounts and bundling policies).
6. Automate Your Investments-Arrange automatic deposits for retirement plans and mutual funds. Automation is convenient and takes the emotion out of investing. Deposits are made regardless of market conditions.
7. Assess Your Investment Risk Tolerance- Make sure that your investments match your risk tolerance. A simple investment risk tolerance assessment is available at http://pfp.missouri.edu/research_IRTA.html.
8. Set Written Financial Goals- Write down what you want to purchase or achieve, how much it will cost, and a target date for completion. Then “do the math” to determine the amount of periodic savings needed.
9. Consider Getting Help- Hire help when needed (e.g., when facing new life challenges (e.g., a divorce) or decisions (e.g., investing an inheritance)). To find names of local advisors, check https://www.cfp.net/. 
10. Stay Informed- Read a personal finance magazine (e.g., Money, Kiplinger’s), view financial news programs and websites, and attend financial seminars. Never consider your financial education finished. 
11. Examine Your Spending Habits- Resolve to track all income and expenses for a month to see exactly where your money goes. Then identify spending “leaks” that can provide money to invest or repay debt.
12. Eliminate Consumer Debt Quickly – Add money that you had been paying to a paid-off creditor to the amount due to remaining creditors. Start making extra payments first on debt with the highest interest rate.
13. Increase Your Retirement Savings– Ask your employer to raise your 2020 retirement savings plan contribution. Even a small increase of 1% of pay can result in thousands of additional dollars at retirement.
14. Make a Required Minimum Distribution (RMD)– If you are age 70 ½ +, 2019 RMD withdrawals must be made by December 31. For RMD instructions, see https://articles.extension.org/pages/27766/how-to-make-required-minimum-withdrawals-from-retirement-savings-plans.
15. Share the Wealth– Make year-end 2019 charitable contributions, including appreciated assets (e.g., stock) and Traditional IRA withdrawals, if age 70 ½+. Donations do not just have to be made with cash. In addition to helping a worthy cause or charity, you may receive tax benefits if you itemize deductions.

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