Checklist: 10 Financial tasks to complete before the end of the year.
It’s typically a tradition to kick off New Year’s resolutions every January. But resolving to tackle some important financial tasks between now and December 31 may help you save money, lower your tax bill, and ring in 2023 in stronger financial shape.
Here are 10 financial to-dos to cross off your list by the end of this year.
1. Review your 2022 financial goals.
Did you meet them? Why or why not? Checking in on the progress of your goals can help you identify specific areas to work toward in 2023, as well as help you decide how to prioritize spending and saving. If you didn’t set any goals in 2022 this is a great time to make some goals for the new year.
2. Fund 401(k) and other retirement accounts.
If you have a tax-deferred retirement account like a 401(k), any contributions you make before the end of the year may reduce your 2022 taxable income. If you get a year-end bonus, consider using part of it to fund your retirement accounts. You may also want to consider converting a traditional IRA to a Roth, especially if your income was lower this year. Roth IRAs grow tax-free, and the withdrawals are tax-free. If applicable, remember to take your required minimum distributions (RMDs) from your retirement plans.
3. Make college savings contributions.
Plan for upcoming college expenses by setting up and funding a college savings account, like a 529 plan. The money in a 529 savings account grows tax-deferred, and withdrawals are tax-free when used for qualified education expenses like tuition and textbooks.
4. Donate to your favorite charities.
In addition to helping others, your charitable contributions made by December 31 count toward your 2022 tax year. There are many ways to donate — money, used clothing or household items in good condition, or even gifting through stocks or trusts. (Consult your tax advisor for details.) If you’re looking for guidance on making a charitable donation check out the IRS website.
5. Spend any remaining funds in flexible spending accounts (FSAs).
If you’ve funded this tax-advantaged account for medical or dependent care expenses, make sure to spend down your account before the end of the year to avoid losing the funds. In some cases, you may be able to roll over a portion of the remaining funds to next year or obtain a grace period. This is also a good opportunity to review how much you spent in 2022 to help plan your 2023 FSA contributions.
6. Review your insurance policies.
Does your current coverage still meet your needs? Look at premiums, deductibles and coverage limits on your life insurance, car insurance and homeowners insurance policies to see. Consider shopping around for better rates, bundling policies or increasing deductibles to help you save money on premiums.
7. Check your investment accounts.
Review gains and losses for the year as well as your current asset allocations. Consider whether it makes financial sense to make any changes or rebalance your portfolio.
8. Consider any life changes.
If you’ve experienced major life events, like a new baby, new job, marriage, divorce, a child starting college or even a move, consider how those events might impact your health insurance, tax planning, estate planning and income withholdings and deductions. The IRS Tax Withholding Estimator can help you determine whether you’re withholding enough, too much or too little from your paycheck.
9. Review and adjust your budget.
Examine your spending during the past year in categories like housing, transportation, food and utilities. Check your progress on reducing debt, saving for emergencies, and other goals. Do you anticipate any major expenses next year, like replacing your furnace, a landscaping project or a new car? Are there areas where you can cut spending to free up funds for your most important goals? This is also a good time to request a free copy of your credit report, review your financial history, and ensure that it’s accurate.
10. Set specific and measurable goals for next year.
Instead of saying, “I will save more money next year,” try this: “I will commit to transferring $250 per month into a high- yield savings account dedicated to my down payment for a new car.” Or commit to paying down a specific credit card debt by a specific amount within six months. Make a list of your goals and check your progress each quarter. Financial goals that are actionable, specific and measurable are more likely to provide motivation and boost the odds that you’ll meet them.
Set yourself up for success in 2023.
Checking these tasks off your list before the end of the year is an important step toward starting 2023 on sound financial footing. You may also want to schedule a meeting with a financial advisor who can work with you to ensure you’re doing everything you can to lower your tax obligations, keep more of your money, and focus on the financial priorities that matter most to you. Learn more about our Commerce Financial Advisors and how to locate one near you.
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Commerce does not provide tax advice or legal advice to its customers. Consult an attorney for legal advice, including drafting and execution of estate planning documents. This material is not a recommendation of any particular investment or insurance strategy, is not based on any particular financial situation or need and is not intended to replace the advice of a qualified tax advisor or investment professional.