A year-end financial checklist allows you to make sure you’re on the right track to achieving your financial goalsOpens in New Window. A new year is the perfect time to reflect on your financial goals. These types of goals work best when they are as specific as possible. They can be broken down into short (0-5 years), medium (6-10 years), and long--term (10+ years) goals.
They can also be further categorized into the type of goals they are. When it comes to our finances, we can rely on cold hard data to assess our progress (numbers-based goals) and/or we can base our goals on our attitude and behaviors (habits-based goals).
Goals and priorities change as we move through different phases of our lives. What matters to you now might be drastically different than what you cared about five years ago. Perhaps you’ve got a steady income now and can expand your investment goals, or perhaps you have children and need to plan for college funding.
Below is a breakdown of financial categories to help you start to form your personalized goals and aspirations. As you’re thinking through these categories, place your goals into short-medium-, or long-term, then determine if they are numbers-based or habit-based.
Career and Education
Think about your level of satisfaction in your current position and whether or not you’d like to many any changes, such as pursuing a higher position, joining a different company, or choosing an entirely new career path.
Will you, your children, or grandchildren be pursuing higher education within the next 1-5 years? Can you set aside money in the budget now to help pay for those costs?
Continually assessing your career and education goals will help you feel more prepared, and hopefully feeling satisfied and content. You don’t want to come to the end of your working life and realize you never pursued what you’re truly passionate about.
Here are some examples of 2023 career and education financial goals:
Think about your short, medium, and long-term savings goals. Do you have any major purchases coming up in the next year? Consider these categories as you think about your goals.
Maybe you need to make changes regarding your savings habits and behaviors in the new year. Are you happy with your mindset regarding saving money? Or is it something you struggle with? Consider adding behavior goals to your 2023 financial checklist.
Investing is a fantastic way to make your money work for you, while building wealth. However, knowing how to get started can certainly feel overwhelming. Short-term investing options include brokerage accounts, money market accounts, bonds, and CDs, while long-term investing options include 401(k)s, pension plans, real estate, and Roth IRAs.
If you want to feel more empowered about your investing options, create goals that will help you increase your investing knowledge. Read books, listen to podcasts, take a class, speak with a financial advisorOpens in New Window, etc. Knowing your options and gaining confidence are the first steps in building a healthy investment portfolio.
Whether it’s eliminating credit card debt or paying down your mortgage, what goal would you like to accomplish in the next year?
There are many strategies for debt payoff such as debt snowballOpens in New Window, debt consolidationOpens in New Window, and debt avalancheOpens in New Window. List your debts and choose a payoff strategy that best fits your budget and personality.
Unfortunately, most people form their early retirement plans using faulty logic without even realizing it. They begin their planning with a number in mind: "If I can save up $1 million,” they think, "I’ll be able to retire early.”
However, this type of goal setting isn’t very effective, if you want to achieve an early retirement that you’ll comfortably enjoy. This is because saving up $1 million (or any arbitrary retirement savings number) without proper future forecasting doesn’t give an indication of the lifestyle you’ll be able to live. Consider the following scenarios.
For example, imagine you live in a nice, 3,000-square-foot home in the Washington D.C. Metro area. You’re within walking distance of your favorite local hangout spots. You drive a nice car and can take a luxury beach vacation every summer. A $1 million nest egg, while seemingly a cushy savings balance, may not be enough for you to continue enjoying the lifestyle you’re accustomed to.
If, on the other hand, you live in a small townhome in Springfield, Missouri, a $1 million nest egg might be plenty to live on. Your townhome is located just a half mile from your workplace, so you can bike or walk to work most of the time. And you’re more of a homebody anyways, so you don’t like traveling to exotic locations when you’re off work. You’d rather spend time at your local golf course with your friends.
As you can see, retirement plans can differ drastically from one person to another. Each person’s financial roadmap includes different levels of income, sacrifice, and strategies to get there. To truly learn how to retire early, you have to plan for what your early retirement looks like—and then create a financial plan to get there.
Now that your financial goals are at the forefront of your mind, use this 2023 financial checklist and make this year your financially strongest one yet.
1. Reevaluate your budget
Long gone are the days of endless spreadsheets and confined spending. Budgeting has become increasingly popularOpens in New Window and - thanks to popular budgeting softwareOpens in New Window - easier than ever. If you don’t have a consistent method of tracking your income and spending, now is a great time to start!
If you budgeted throughout 2022, now is the time for an annual review.
Your budget is the roadmap to your personal finances. An organized and concise budget can be the difference between hoping you’ll reach your financial goals and knowing you will.
Take a thorough analysis of your income and spending and fine-tune your budget for 2023.
2. Get ahead of your taxes
Preparing for tax season is one of the best ways to ensure you’re taking advantage of every tax opportunity.
3. Review your insurance
Having the right amount and type of insurance is crucial to achieving financial freedom. You may discover you need more coverage to protect yourself financially, or you may be able to reduce your monthly costs. While going through your year-end financial checklist, be sure to fine-tune your insurance needs and update any beneficiary information.
Employee Benefits: Your employee benefits can be a valuable part of your financial portfolio and it’s important to know all your options.
Review all your benefits such as medical, vision, and dental coverage, profit sharing, retirement contributions, stock options, reimbursements, flexible spending accounts, and more. There could be a benefit you can start taking advantage of that you haven’t previously.
Health Insurance: Reflect on your medical expenses this year and determine if your current coverage was the right type and amount. If you had a life event this year, such as the birth of a child or marriage, your medical coverage needs to be updated.
If you rarely needed medical care but paid an exorbitant amount of money in premiums, consider switching to a high-deductible plan. On the other hand, if you have a high amount of medical needs, you’ll likely want to sick with a no/low deductible plan.
Car Insurance: You might be surprised how much money you could save by spending an hour shopping around for car insurance. There are many ways to lower your car insurance costsOpens in New Window.
Do some research and find the right amount of car insurance for youOpens in New Window. Then compare rates from a few different companies to find your desired coverage for the best price.
Home Insurance: The end of the year is a great time to review your home insurance policy.Opens in New Window Newly acquired valuables, renovations, additions, safety updates, and even new pets can all affect your home insurance needs.
Life Insurance: It’s important to also review your life insurance policy because it protects your family’s financial future. A new life event, such as a change in marital status, taking out or paying off a mortgage, retiring, receiving a significant raise, etc., can change your life insurance needs. A change in your health can also affect your life insurance policy.
4. Review your portfolio
An annual portfolio review can help you determine whether or not you’re on track for your financial goals. Your portfolio is highly personalized based on your age, time horizonOpens in New Window, risk tolerance, income, and other factors. Small changes can add up to major results - the "set it and forget it” approach should not be applied to your investments.
Take a look at all of your investments and see if your budget needs to be adjusted. Perhaps you’re making more money now and you can increase your retirement contributions from 10% to 15%. Or, maybe inflation is squeezing your budget and you need to adjust your investments to prevent going into the red each month.
Reviewing your portfolio can also help you develop an efficient tax strategy. Minimizing your tax burden can help you reach your financial goals more quickly.
5. Monitor credit and protect your identity
As part of your financial checklist, it’s a good idea to review your credit report and check your credit scoreOpens in New Window, especially if you plan on making any major purchases soon. If you are not already signed up for free credit monitoringOpens in New Window, now is a great time to enroll! Fraud prevention is an important step in protecting your finances.
You’ll want to make sure your accounts remain safe and secure. Utilize a password checkup extension on various devices to ensure your passwords are strong and protected, especially ones for your financial institutions.
Another important task in your 2023 financial checklist should be to protect your identity. Unfortunately, scams are increasingly present and you need to be protected. Signing up for low-cost identity theft protection and restoration services Opens in New Windowcan help protect your finances.
At Lafayette Federal Credit Union, we provide our members with a variety of resources to help them grow their wealth, increase their financial knowledge, bank conveniently, take charge of their debt, and more.
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