The end of the year is a perfect time to take stock of your finances and make adjustments to set yourself up for success in the coming year. Reviewing your finances now allows you to benefit from tax-saving opportunities, adjust your investment strategy, and plan for any life changes on the horizon. By giving attention to a few key areas, you can finish the year strong and start the next one with confidence. Here’s your essential year-end checklist:

Rebalance Your Investment Accounts and Harvest Losses

Throughout the year, your portfolio’s asset allocation may shift as certain investments grow or decline faster than others. This “portfolio drift” can leave you exposed to a higher or lower level of risk than intended. Rebalancing helps bring your portfolio back in line with your target allocation, ensuring it aligns with your financial goals.

Why Rebalancing Matters:

1. Maintain target risk level: Rebalancing helps you keep the intended risk level for your portfolio, preventing overexposure to certain asset classes.
2. Lock in gains: By rebalancing, you may sell appreciated assets and use the proceeds to buy underperforming ones, potentially locking in gains.

Tax-loss harvesting is another strategic move. By selling investments at a loss, you can offset capital gains and reduce taxable income. The IRS allows you to deduct up to $3,000 per year in capital losses against ordinary income, with any additional losses rolling over to future years.

Tax-Loss Harvesting Benefits:

1. Immediate tax deduction: Up to $3,000 in losses can be deducted each year.
   
2. Future savings: Losses exceeding the annual cap carry over to future years, potentially saving you money down the line.

You can utilize tax loss harvesting with pretty much any brokerage account out there—here are a few top options:

Fidelity Investments

Robinhood

Vanguard

Merrill Edge

Interactive Brokers

Keep Paying Down Debts

Debt repayment is crucial to improving financial health and reducing stress. As the year ends, staying consistent with debt payments not only reduces the burden of interest but also helps protect against the impact of rising rates, especially on variable-rate debts like credit cards or adjustable-rate loans. Year-end is a good time to assess your repayment strategy and perhaps set goals to increase your debt payments in the coming year.

Strategies to Consider:

1. Focus on high-interest debt first: Paying down high-interest debt first, like credit cards, can save you the most in interest payments.
2. Consider consolidation: If you have multiple debts, consolidating can simplify payments and potentially reduce interest costs.

If You Have Student Loans—Check on Them

Student loan borrowers have been thrown into disarray over the last couple of years due to uncertainty surrounding forgiveness, repayment plans, and the system’s overall structure. Broad-based forgiveness has been proposed and struck down twice, repayment plans have been changed, and now, legal challenges have thrown borrowers enrolled in the SAVE repayment plan right back into forbearance while they await a ruling on whether or not their repayment plan can remain an option. 

This has been a challenging time for those with student debt, and it’s essential to stay informed of any changes that could affect your payment plan or forgiveness options. Reviewing your loan status before year-end allows you to see if any new programs are available or if you’re eligible for revised repayment options based on income.

Review and Renew Your Budget

A good budget evolves with your life, and year-end is an ideal time to update it. Perhaps your priorities have shifted, or you’ve had changes in income or expenses. Revisiting your budget now can reveal areas where you’re overspending, uncover extra savings opportunities, or help set aside funds for upcoming expenses.

Budgeting Tools to Help You Stay on Track:

1. Goodbudget
2. PocketGuard
3. Personal Capital
4. YNAB (You Need a Budget)

Key Areas to Reevaluate:

1. Savings goals: Are you on track for major goals like travel, buying a home, or an emergency fund?
2. Recurring expenses: Review subscriptions and memberships to cut unnecessary costs.
   Income adjustments: If your income has changed, recalibrate your spending and saving proportions.

Take Stock of Your Retirement Saving and Investing

How are you doing with your retirement savings? With 57% of Americans feeling behind on retirement savings, a year-end review can be valuable. Check your retirement account balances and see if you’re contributing enough to stay on track for your goals. This is a good time to adjust contributions if you’re not meeting your target or if a change in income has impacted your savings rate.

Be Aware of Deadlines

As the year ends, knowing key financial deadlines can help you maximize tax benefits and avoid missed opportunities. Here’s a breakdown of important cutoffs to keep in mind:

Contribution Deadlines

Tax-advantaged retirement accounts like 401(k)s, IRAs, and Health Savings Accounts (HSAs) each have unique contribution deadlines:

1. IRAs and HSAs: Both Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs) allow contributions up to the tax-filing deadline, which is typically mid-April of the following year. This extended period gives you added flexibility to contribute and make tax-advantaged adjustments based on your year-end financial position.
   
2. 401(k)s: Contributions to 401(k) plans, however, must be made by December 31 to count for the current tax year. This earlier deadline means you’ll need to plan any adjustments ahead of year-end to maximize your retirement savings and reduce taxable income.

FSA Reimbursement Deadlines

Flexible Spending Accounts (FSAs) typically follow a “use it or lose it” rule, where unspent funds at the end of the plan year may be forfeited. Some plans offer a grace period or a limited rollover amount, but these options vary. To avoid forfeiting your FSA contributions, check your plan’s specific rules and submit eligible expenses on time.

Charitable Contribution Deadlines

To claim deductions for charitable donations on your 2024 taxes, contributions must be made by December 31. In 2023, Americans donated over $500 billion to charitable organizations—a number expected to rise this year. 

The IRS allows deductions of up to 50% of adjusted gross income (AGI) for qualifying donations, making this one of the most impactful deductions you can take. For example, a high-income earner in the 32% tax bracket who donates $30,000 could potentially drop to a lower tax bracket. Making donations by the year’s end lets you support causes you care about while also reducing your taxable income.

One great way to do this is through donor-advised funds (DAFs), which offer a flexible, tax-efficient way to give to charity by allowing you to make a donation, receive an immediate tax deduction, and then recommend grants to charities over time—ideal for strategic, long-term giving.

Some of the most popular DAFs out there include names like: 

Fidelity Charitable

Schwab Charitable

Vanguard Charitable

National Philanthropic Trust

DonorsTrust

Make Sure You Have an Estate Plan in Place

An estate plan isn’t just for the wealthy—it’s a tool for anyone who wants control over their assets and legacy. Having an estate plan in place ensures that your assets are distributed according to your wishes and can help reduce taxes and fees for your beneficiaries. Year-end is an excellent time to review or set up essentials like a will, power of attorney, and healthcare directive, providing peace of mind for you and your loved ones.

Estate Plan Essentials:

1. Create or update a will: Specify who will receive your assets and name guardians if you have minor children.
2. Establish power of attorney: Designate someone to manage your affairs if you’re unable to do so.
3. Set up healthcare directives: Outline medical wishes to guide family members if you can’t make decisions yourself.

Review Your Insurance Coverages

Insurance is a key part of financial security, yet it’s easy to overlook. According to Nationwide, more than half of U.S. homes are underinsured, leaving homeowners vulnerable to catastrophic expenses in the event of disaster. Whether you own a home or rent, reviewing your insurance coverage at year-end can prevent unpleasant surprises in case of a claim.

Check Your Credit Report

It might seem basic, but it’s still essential. Regularly reviewing your credit report is a cornerstone for maintaining financial health. Checking your report at least once a year helps you catch errors, prevent fraud, and monitor your credit score. Annual credit report checks are free from each of the three major credit bureaus, allowing you to stay on top of any changes.

Closing Thoughts

Year-end is an ideal time to fine-tune your finances and set yourself up for success in the coming year. By reviewing core areas like your investments, debt, retirement contributions, and insurance, you can strengthen your financial footing and approach the new year with more confidence and control.

Here are a few closing tips to keep in mind as you go through your year-end financial review:

1. Prioritize organization: Gather all financial documents, statements, and recent bills to have everything you need on hand.
   
2. Set goals for next year: Identify a few specific financial goals to keep your review focused and forward-thinking.
   
3. Take it one step at a time: Break down your review into manageable sections, like budgeting, saving, or taxes, and tackle each one separately.