8 Year-End Financial Planning Tips

With the end of the year approaching, it's always an exciting time to look forward.

We all enjoy making resolutions and setting new goals for the upcoming year.  For our finances, it should be no different!  December can be a great time to reflect on what we accomplished in the current year, and what we need to focus on in the upcoming year.  Listed below are some planning tips to help guide your financial planning and goal-setting for the upcoming year.

1. Create a year-end balance sheet. A balance sheet is sometimes referred to as a net worth statement.  To make things even more simple, a balance sheet is simply a list of the things that you own (assets) and the things that you owe (liabilities).  Your net worth is the difference between the two (Assets – Liabilities = Net Worth).  It can be very useful to track your net worth over time.
2. Determine your biggest financial to-do.  Sometimes, this can be very difficult.  We don’t know the most important thing to focus on.  As a starting spot, check out the episodes and blogs related to the “Sequential Investing Hierarchy” on our CFR Money Mindset page.  These episodes relate to the steps we can take to reach a place of confidence and contentment in our finances.  After reviewing these episodes, determine where you fall on the hierarchy.  Once you know where you currently stand, you can determine the next step to take.
3. Review your spending plan. I know, I know.  Budgets are boring.  This is, however, a critical step to improve our finances.  Review your trends and spending over the past year.  What did you do well?  Where do you need improvement?  By revamping your spending plan heading into next year, you will allow yourself to give each dollar a job.
4. Increase your savings rate by 1%.  At Lockshield Partners, we are big fans of small, consistent improvements.  As Confucius once stated, “The man who moves a mountain begins by carrying small stones.”  We can’t become financially independent overnight.  By making incremental improvements over time, however, we can make a drastic change.  The end of the year can be a great time to increase your savings rate.  By increasing it 1%, you’ll barely notice a difference in your net pay.  If you continue this habit over the years, the additional amount you’re investing adds up significantly. PRO TIP!  Check out an online future value calculator to note the difference a savings rate increase can make on your projected future value.  Please note that these calculators often contain variables that aren’t guaranteed.
5. ‍Update your “Important Documents” list.  At Lockshield Partners, we like to use a document called the “Organization Letter.”  This document helps us to maintain an organized approach to keeping our important documents (such as estate planning documents, birth certificates, account statements, etc.) orderly.  As a best practice, it’s wise to update this document annually.  Make sure that someone you trust knows how to access the document in the event that something happens.
6. ‍Review your beneficiaries.  As a follow-up to the previous point, the end of the year is a great time to make sure that your beneficiary designations are the way that you’d like them to be.
7. ‍Review your portfolio allocation.  Has your time horizon changed?  What about your investment goals?  Every year, it’s important to ensure that your investment allocation matches up with the short and long-term financial goals that you have.
8. ‍Create a giving plan.  As we’ve discussed many times, God calls us to be excellent stewards of the resources given to us.  Commit some time to prayer to determine your giving strategy.  My personal favorite is similar to the savings rate strategy above.  Try to increase your giving by 1% per year – you’ll be amazed at the long-term impact!

It’s important to remember that all financial plans change.  Nobody has a “static” financial plan.  The biggest key when looking forward to next year is ensuring that your financial decisions line up with your priorities.  Don’t hesitate to reach out to our team of planners to help you review your plan!