The last month of the year is the perfect time to evaluate your 2021 finances and look for smart money moves to make before the year ends. December is usually a busy month for many individuals and families as they quickly move from one holiday event to the next. Financial conversations and considerations get set aside. Unfortunately, this can result in missed opportunities and, maybe, regret.
This December, consider these following money moves to make.
1. Perform your Financial State of the Union.
Your Financial State of the Union is a review of six key areas of your financial journey. The end of the year is the perfect time to do this. If you are married, this can create a great financial conversation and help to keep both you and your spouse on the same financial page. The Financial State of the Union also helps you see your financial reality.
Here are the six areas you need to review:
Review your generosity. How much did you give last year?
Review your cash. How much do you have in your checking and savings accounts?
Review your debt. How much did you pay off? What do you still have left?
Review your retirement account. How much have you saved for retirement?
Review your net worth. What are your assets and liabilities?
Review your goals. Did we accomplish our goals this year?
2. Consider having a conversation with a tax advisor.
Are there some money moves you could make in 2021 to reduce your taxable income? Meeting with a tax advisor before year-end can help you identify where you can save money and, potentially, how you can better give money. A tax advisor can also make you aware of any upcoming tax law changes of which you need to be aware.
3. Don’t waste year-end bonuses.
Your company may provide you with a year-end bonus. If so, don’t be quick to spend the money. Instead, consider your next Money Milestone and how those funds can be used to help you get there. Do you have debt? Consider using the bonus to reduce the amount. Are you without an emergency fund? Consider placing the money in savings account for an unforeseen financial emergency. Don’t miss the opportunity to use a bonus in a financially smart way.
4. Rebalance your investment portfolio.
Due to the ups and downs of specific investments, portfolios become out of balance. Maybe your stocks may take up a portion of your portfolio that exceed your comfort level. Maybe your bonds take up a portion that is larger than you desire. Maybe you invested in cryptocurrency and its growth has made your portfolio more volatile than you prefer. We are at the end of a quarter and year. So, now is a great time to rebalance your investment portfolio so that it reflects your preferred investment strategy.
5. Avoid Christmas debt.
Okay, I have hit on this a lot over the past couple of months. Too many Americans go into debt over the holidays. They spend too much money on gifts, travel, and entertainment. The momentary happiness derived from these expenditures turns into months-long regret. If your finances have tapped out, you need to tap out as well. Don’t let the holiday pressures cause you to make unwise money decisions. Avoid Christmas debt.
Have a great December and New Year. Make a few smart money moves this month to set yourself up for a great 2022.