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Cleaning up personal finances remains one of the top resolutions every new year. But we all know what happens to most resolutions, so here's a month-by-month to-do list to help cultivate better financial health.
January: Organize paperwork. This obvious starting point eludes many. Are your financial documents organized, in paper or digitally, so information is at your fingertips? Your loved ones will be thankful if you unexpectedly die or are incapacitated.
February: Consolidate investments. Trim the number of accounts you have and consolidate all your dormant 401(k)s into individual retirement accounts (IRA). Spreading your assets across various brokerage accounts is not smart diversification — it's a recipe for confusion.
March: Follow the money. If you're still working and too busy with your life, you may have a poor sense of your personal cash flow, the money that comes in and where you spend it. You can't establish how much you save or spend without knowing your current financial status.
April: Tax smarts. It's better to owe your state and the federal government instead of overpaying throughout the year. Keep track of your IRA limits, taxable accounts and check to see if you're eligible for tax credits.
May: Investments. How much do your investments cost you? Do you know what your insurance agent, 401(k) plan or financial advisor charges? How about the underlying expenses you pay to buy mutual funds or exchange-traded funds?
June: What are you worth and why it matters. Calculate your net worth by adding up all your assets, such as your home and retirement funds, minus all your liabilities, such as your mortgage and credit card debt. A sophisticated net-worth calculation projects factors of asset growth and your rate of saving and liabilities to the end of your life.
July: Insure against risk. Insurance keeps you financially whole if disaster strikes. Consider long-term care insurance, especially if you're a woman with a longer life expectancy than a man. This coverage helps with costs of basic daily needs over an extended time.
August: Retirement planning. This planning starts in your 20s and does not end when you retire. If you're employed, know when you can afford to retire (. Create or review your retirement plan. Determine your retirement income needs, see how much you should save, and save, save, save.
September: Gift wisely. You can give back in many ways to organizations and people you care about with donations of appreciated securities or with payments on college loans or new mortgages. The Internal Revenue Service offers several guidelines on gifting.
October: Prepare for the inevitable. Engage an estate attorney. If you die without a will, your state of residency distributes your assets with no input from you. If your estate documents are older than seven years, it's probably time for a refresh.
November and December: Reality check. It's the end of the year, which means it's time to review your finances before another year begins. Here are some more things to consider before Jan. 1:
- Fund health savings accounts (HSAs).
- Spend unused funds in flexible spending accounts before Dec. 31.
- Any capital losses you realize before Dec. 31 can be used to offset your capital gains.
- Take the Required Minimum Distribution (RMD). In 2023, the SECURE Act 2.0 increased the required age to take RMDs to 73 1/2 from certain retirement accounts by Dec. 31.
- Contribute to a 529 plan before Dec. 31.
Talk to a Financial Advisor
Financial advisors at BECU Investment Services are here to help. Our team will take the time to get to know you, understand your goals and plan and implement a financial and retirement strategy that's appropriate for you. Set up a complimentary consultation or call 206-439-5720 today.
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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing.
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