Year End Personal Financial Checklist

Before I start writing my wisdom on financial planning here, let me explain that, until now, I didn’t do anything as fancy as checking off a year-end personal finance checklist – a list of what I didn’t do and can still do before the tax year ends.

Suddenly the idea crossed my mind and I decided to do some research. As I made multiple lists, I realized I’m definitely not financially perfect and have my own fair share of mistakes, and that this blog is a way to become more self aware and make informed decisions.

A lot of good things have happened since I started blogging. I opened a second checking account and reallocated my portfolio. While the reallocation part is definitely positive, it took some time to analyze the rate of return on my stock and bond funds as well as individual stocks. Whether the reallocation is going to benefit me is not yet known.

The biggest gain I received by blogging is the inflow of knowledge. I can advise friends and family on the pros and cons of every type of investment. I know the intricacies of IRAs, Roth IRAs, the Roth IRA rules and 401(k)s. Let’s hope this exercise of year-end financial planning will also add some value to my personal financial health, and you can learn a thing or two in the process.

The idea began with an email from Merrill Lynch, one of my fund brokers. In their newsletter, they mentioned the importance of a year-end checklist. When I went through the list, it did make a lot of sense.

When I see my taxes and health insurance limits get reset every year, there is a need to take stock of my performance, just like my boss looks at my job performance and assigns me a rating.  Here, your goal is not to give yourself a rating but to make changes before January comes and you lose the time and opportunity.

Year-End Personal Finance Checklist

Most of the list should be relevant to all salaried individuals.

Income Tax adjustments

Use the IRS tax withholding calculator to determine if your employer is deducting too much or too little income tax from your salary. See if you’re on target for your 2011 taxes. Consider increased deductions that you could use this year, or even postpone income until 2012.

Social Security Tax Status

An individual with wages equal to or more than $106,800 would contribute $4,485.60 to Social Security in 2011, including the self-employed. If you have already contributed this amount, there is no need to deduct further – save that extra money (4.2% of rest of your income).

Check capital gains and losses

I can brag about completing this one in the past. I had a huge loss in one of my stocks and sold it off in time to take advantage of tax savings that year. In a tax year, you can deduct up to $3000 on a capital loss. Talk to your tax consultant on this one, especially if you are in doubt whether to sell off the ‘gone wrong’ investment or keep holding it.

Maximize retirement savings

Save as much as you can in tax-advantaged retirement accounts and take advantage of any company matching programs as well as “catch-up” provisions available to individuals 50 years of age and older. See if you can maximize your 401(k) or IRA limit. I do maximize and I am proud that I do. My employer matches up to 5% of my salary and don’t let this opportunity go to waste. I strongly suggest you taking advantage of all tax-deferred investment options. If there’s room to increase your investments in an IRA or Roth IRA, don’t hesitate.

Review Your Beneficiaries

Review the person or people you’ve named for your retirement accounts and insurance policies. Did you have a death, birth, or divorce this year that could change the beneficiaries?

Prepay Next Year’s Deductible Expenses

This is interesting – if you need more deductions this year than next year, consider pre-paying some of next year’s expenses now. For instance, making more than your required mortgage payment this year could reduce your 2011 tax bill.

Take Required Minimum Distributions

Once you are age 70½, failure to withdraw the required minimum amount from retirement accounts annually may result in substantial additional taxes. Thus, it may be prudent to familiarize yourself with the minimum distribution requirements and adjust your withdrawal before December 31 to avoid a penalty. Read more here.

Consider Charitable contributions

If you itemize your deductions, you can claim the money you have given to charity. Read the IRS guidelines here. Now is the time to review and make charitable contributions to claim the tax advantage.

Check Healthcare Costs

I have a health savings account. I don’t have to spend the entire balance on this account by the end of the year. But you might have to, if you have a flexible spending account. Don’t forget to get all preventative exams done, including eye and dental exams. Check to see whether scheduled appointments can be moved ahead before December 31 to utilize 2011 FSA contributions.

Re-balance Investment Portfolio

I was going to do it anyway. Depending on past performance and socioeconomic situation, I need to rebalance my retirement savings fund allocation as well as other savings I have outside of the retirement portfolio.

Come the new year, don’t forget to file your tax return early and remember to set a few financial and personal goals. I know I will be doing this. I am ashamed to say,  just as I didn’t check my year-end achievements, I never set financial goals in the past. Let me amend that in 2012 and set a very impressive list of goals.

In a recent job-related leadership training, we were taught about setting SMART goals that are achievable but require a little reaching at the same time. While setting yearly goals, I’d keep all the good things in mind. But the most important factor in setting any goal is to not lose track of the long term goal you have in mind. Your yearly goal should align to that long term one.

It only takes a couple of hours to gather information and review all the points listed above. I am certain to get a lot of satisfaction once I am done. If I find things to adjust, I would love to repeat this next year. I encourage you to sit down with all of your papers after the Thanksgiving holiday.

Readers, what year-end personal finance checks do you usually complete? And what you are likely to start doing this year after reading this post? Did I call for an action here?

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  1. says

    The social security tax shouldn’t be an issue for most people unless they work multiple jobs during the year. Anyone who uses any kind of payroll service or computer-based payroll program already should have the proper reporting of wages. but, if there was a mistake and too much was taken out, it’s very easily remedied on the 1040.

    I’ve also seen people sell of entire positions to harvest the losses, only to discover that they will have a carry-forward for their entire lives. I would recommend only selling off enough of a down position to cover the gains throughout the year plus the extra $3,000 allowable. Anything more than that would really be a waste.

    • says

      A couple of years back I did the same mistake, I did sell entire holding. And now I can not offset my past gains with that loss. Very valuable advice

  2. Charles says

    Wow, that’s a long list of To-Do items for the end of the year. I don’t think i’ve done any one of those yet. I guess I’ll always be a procrastinator.

  3. says

    A year-end checklist is a great idea. I’m trying to remember what I typically do at the end of each year, and just taxes & beneficiaries comes to mind. Maybe I should being doing more!

  4. Dana says

    Nice comprehensive list. We already do a lot of these things. We don’t currently have a health savings account but will next year so I’ll have to watch out for that.

    • says

      One thing you don’t have to worry about HSA is that you don’t have to spend entire balance within a year. This is the requirement in FSA plans

  5. Sean says

    this is a greta idea… but for me most of this turns into a financial to-do list for next year. Thanks for the greta idea, and always for the constant encouragement!
    Sean @

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