2024 Year-End Financial Checklist
As 2024 draws to a close, it’s time to conduct a comprehensive review of your financial situation and set the stage for a prosperous new year. Here’s a detailed year-end financial planning checklist to help you wrap up 2024 on a strong note and prepare for 2025.
Personal Financial Inventory
First take stock of your current financial position. List all your assets, including emergency funds, bank accounts, retirement accounts, investment portfolios, real estate equity and valuable personal property. Next, catalog all debts, such as mortgages, car loans, student loans and credit card balances. Well done, you have created your own personal balance sheet, a picture of your overall financial health. This is also a great time to review your current credit report and check your credit utilization ratio. It’s recommended that you do this at least once per year. Your credit utilization refers to the ratio of your current credit balances to your credit limit. It is a key factor in determining your credit score. A lower ratio indicates that you are using a small portion of your available credit, which is favorable for your credit score.
Goals and Budgeting
Next, check your credit card and bank statements to see where your money is going and whether you can improve your net worth by saving more. With a clear picture of your finances, it’s time to set your 2025 budget and reassess your goals. Use your 2024 spending patterns as a starting point to establish your budget for the upcoming year. Be objective when identifying areas in your budget that are wasteful and that you can do without. If you have loan balances, prioritize high-interest debt repayment and explore refinancing options. When reassessing your goals, you might find it useful to divide them into short-term, medium-term and long-term categories. Short-term is usually defined as under 1 year, medium-term is 1-3 years and long-term is 3-10+ years.
Estate planning
It’s essential to review your estate plan at least once a year, as life-changing events can happen unexpectedly. This ensures your estate plan remains up to date. Review and update the beneficiary designations on your retirement accounts, insurance policies, brokerage and bank accounts. Ensure that your will, trusts and other estate planning documents reflect your current wishes.
Tax Planning
Take steps to optimize your tax situation. Areas to consider would be to review your tax withholdings and adjust if necessary. Plan your charitable donations strategically to maximize the tax benefits. For example, a Qualified Charitable Distribution is a tax-free transfer from an IRA directly to a qualified charity for individuals aged 70 ½ or older. The QCD can satisfy the required minimum distribution without increasing taxable income. Another strategic approach would be to gift low basis stock to charity. Donating these shares to charity allows you to avoid capital gains taxes, while the charity can sell the stock tax-free and you may deduct the fair market value from your taxable income. Finally, tax-loss selling is a strategy used to reduce taxes by selling securities at a loss in order to offset capital gains. If losses exceed gains, up to $3,000 can offset ordinary income annually, with the excess carried forward.
Investment and Retirement Planning
Ensure that your investment strategy aligns with your goals and risk tolerance. Is your target asset allocation appropriate? Review and rebalance your portfolio to your desired asset allocation of growth stocks, dividend stocks and bonds. If possible, try to max out contributions to your retirement plans before their respective deadlines. For 2024, the 401k plan contribution limit is $23,000 with an additional $7,500 catch-up for those aged 50 and older. The deadline to make a 2024 401k contribution is December 31, 2024. The contribution limit for Traditional and Roth IRAs is $7,000 with a $1,000 catch-up for those aged 50 and older. The deadline to make a 2024 IRA contribution is April 15, 2025. Roth IRA conversions are less advantageous for many investors with the market at all-time highs but may still be appropriate based on your individual circumstances.
As you complete your year-end review, document all the strategies you’ve considered, even those you decide not to currently pursue.
You will be glad you did next time you circle back on the subject of your personal finances. If you can anticipate major expenses or life events in 2025 then adjust your financial plan accordingly.
Regularly reviewing your finances at least annually or after significant life events is crucial for long-term financial success. As always, contact Provident anytime to schedule a meeting to discuss financial matters that are important to you.
Dan Krstevski, CFP®