The End of The Year Is Coming. Use this Checklist to Prepare Financially and Meet Your Goals.   

Written by David Elder, CFP®, Wealth Manager | Partner

The end of the year is upon us, again! It’s time to reevaluate your money situation and make sure you are on track to meet your savings and spending goals for the year. At the beginning of 2023, a whopping 87 percent of people felt confident that they would meet their goals this year, but by February, only 22 percent of the same respondents were on track. And it’s a very high possibility that the number is only a single digit at the end of December 2023.

One of the best ways to meet a goal is to check throughout the year to ensure you’re on the right track. Before the end of the year, there are critical things you’ll need to do to reduce your tax burdens, as well as planning for the year ahead.

Review your year-end checklist.

Using a year-end checklist, like this one[1] , is a perfect way to keep yourself organized and accountable. Are you in a good financial position to make all your contributions, or do you need to reallocate funds to be able to do so? Here are four critical things you need to do by year-end:

  1. Bulk up your 401(k). Are you close to maxing out your 401(k)? Contributions increased this year over last year to $22,500, up from $20,500. If you haven’t increased your contribution to match, now is a good time to add in a couple thousand more dollars to your 401(k). If you’re above 50, you can increase your contributions an additional $7,500, up from $6,500.
  2. Increase your giving. Giving is a great way to decrease your taxed earnings while simultaneously helping others. If you haven’t set aside time to go over your giving contributions and ensure they’re in line with your financial goals, do so now. This does two things: First, it moves assets out of your estate, reducing future estate taxes. Second, it provides an income tax deduction today, which helps offset taxes on other income.
  3. Engage in tax-loss harvesting. Tax-loss harvesting is when you sell stocks at a loss to protect yourself from taxes. At Merit, we do this for all our clients, but if you have questions about how this works, reach out and schedule an appointment with your financial advisor. If you don’t have an advisor, reach out to learn more. [2] 
  4. Update your beneficiaries. Your beneficiaries are those who get your accounts after you pass on. Make sure to check on these annually so you can ensure that everyone is getting what you want them to, especially if your family members (or dynamics!) have changed over the last year. Now is also an excellent time to consider adding a charity to your beneficiaries list, as this can reduce the tax burden of your estate.

Look ahead and make goals for 2024 

While checking in with your 2023 goals, it’s a great time to look ahead and prepare for 2024. Are you going to max out your 401(k)? How are you going to make that happen? SMART goals measure things in your life in a tangible way so you know when you’ve completed a goal. For instance, a SMART goal would look like this:

  • Specific: I want to max out my 401(k) next year.
  • Measurable: I will do this by setting aside $2,000 a month in a retirement account.
  • Attainable: I currently have an extra $2,000 to set aside.
  • Relevant: This will help me prepare for retirement.
  • Time-bound: I will have set aside $23,000 by the end of December 2024.

Set non-financial goals to increase quality of life. Not only should you be considering financial goals for next year but think about your non-financial goals as well. You may want to learn to play the tuba or go skiing for the first time. These “fun goals” are great to add to your list and include in your plan to ensure you follow through. Sometimes these fun and financial goals can overlap, so while saving for retirement feels so far away, saving for a ski vacation can feel more motivating.

What are the biggest mistakes you can make?

If you go into the end of the year lackadaisical, you could lose assets or miss out on some tax benefits. Here are two mistakes we see frequently:

  • Failing to go through the checklist by the end of the year. Year-end checklists, like this one[3] , help you stay on track for your year-end goals. Failure to consult a checklist could mean you don’t end up meeting your goals. If you don’t work with a financial advisor, don’t forget to set calendar reminders on your monthly or quarterly goals to ensure checklist deadlines aren’t missed.
  • Failing to make certain deposits that are confined by the year. Certain things you can only do during the calendar year. For instance, you can only max out your 401(k) once a year, every year. If you miss a max contribution in 2023, you cannot make up the difference in 2024. Same thing with charitable giving. You cannot get tax benefits this year for money you didn’t give. If these are part of your overall financial plan, then it’s essential you follow through close to the end of the year.

Most importantly, don’t be too hard on yourself if you don’t achieve your financial goals in 2023. While a new year provides us all with a clean slate, it’s also an opportunity to build on our successes and learn from our failures. Reflect on what worked and what didn’t, and make those adjustments in your 2024 goals and financial plan. And be sure to lean on your financial advisor during times like these.

Curious about how your money could look at year-end with professional guidance? Contact Merit Financial Advisors today for a complimentary consultation and download a copy of your year-end financial checklist here![4] 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. We suggest that you discuss your specific situation with a qualified advisor.