Just counting the days 2021 will soon pass. It's time to reflect back on what has been achieved and needs to be improved for the following year. Including in terms of finances. This is important to do so that finances remain safe and stable.
"Now is the time to plan for the changes you might want to make next year," said Sonya Mughal, CEO of Bailard, an independent boutique wealth and asset management firm in the Bay Area.
Financial examinations should be treated in the same way as annual check-ups at a doctor. "Sometimes we forget to take the time, but it's important to hit the ground running with yourself, your family, and your counselors," she says.
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With that in mind, here are some of the tasks advisors suggest to complete, as part of your financial check before early 2022.
1. Review 2021 Expenditure
Set aside an hour or two to review spending in 2021 for all categories. Did you spend as planned? If not, you may need to create a new budget for the new year.
"This is a good basis for planning for the coming year," said Wayne Maslyk, Certified Financial Planner.
Record your monthly expenses in Google docs or in the app to list your expenses and create new budgets more easily.
2. Donate to Charity
Donations are very important. So it needs to be researched properly, don't let this donation damage the existing postal expenditures. Do a thorough check of what donations have been made throughout the year.
In addition, also check if there are institutions that apply a small tax when donating. “Donating to charity can be a great way to save tax money,” says Tony Molina, certified public accountant and product evangelist at Wealthfront.
"Assuming you have a marginal tax rate of 30 percent, and you maximize the deduction, that's a $90 savings and you're helping someone else," he said.
3. Plan for the Worst Scenario
Everyone should have a backup plan. Take a few minutes to update the beneficiaries in your financial accounts, including retirement, investment, and benefits accounts.
Then, review your housing plans. Make sure you have a power of attorney, which ensures that someone you trust will pay your bills and handle other financial matters should something happen to you.
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Create a will, specifying who you want to give your assets to after you die.
If you have children, you can also name them a guardian. This is especially important if you have never done it before, or if you are going through a major life change (for example, you are divorced or have children).
4. Consider Increasing Your Retirement Contribution
The maximum contribution limit for a 401(k)s retirement plan will increase by USD1,000 in 2022 compared to 2021, for a total of USD20,500, or USD27,000 for those aged 50 and over.
If you have plans to increase your contribution do so immediately so that you save even more.
Even if you can't maximize your 401(k) or individual retirement account (the contribution limit for this account remains at USD 6,000 for 2022), see if there's a way to increase your contribution by even 1 percent next year. It may not seem like much, but it will add up.
5. Take Time for a Life Audit
Finally, try something a little more fun. This was the topic of the previous newsletter, but if you haven't already, take the time to do a Life Audit.
During this process, you basically list all your goals, short-term and long-term, on a Post-it note.
This can help you think about your goals and re-prioritize what's important to you.
