Checklist: Annual Financial Check-Up

Too many people wait until they file their income-tax returns to evaluate the preceding year’s finances and plan for the next. You should really begin much sooner, though, perhaps before year-end. This will give you plenty of time to analyze what you have accomplished and to plan for what you hope to accomplish. A checklist of questions might help.

(1) What are your financial goals?
Before you do anything with your money, you should decide how you want to spend it. You should itemize what you have presently, what you need for the year ahead, and what you hope to have ten, twenty, or thirty years in the future.

(2) Over the past year, have you made progress toward achieving your goals?
You should probably compare the performance of your investments to the goals you’ve established with regard to those investments for the year. The results of this analysis will help you decide whether or not you should alter your investments.

(3) Are any changes about to occur that will affect either your immediate needs or your long-term goals?
A job change, for example, may drastically alter your income and your lifestyle. Other circumstances that may affect your finances might include buying a new house, financing an education, or paying for a wedding. Planning at least a year in advance will help you to adjust to these changes financially.

(4) What can you do to minimize your taxes?
A general rule for tax purposes is to defer income to the next year while accelerating deductions for the present year. To defer income, you might postpone selling assets [or collecting bonuses], and you might also purchase Treasury bills or other investments on which interest or dividends are not payable until the next year.

Quite often people will also make contributions to their Individual Retirement Accounts at the last minute for an additional deduction. However, it may be advantageous to make your IRA deposits early in the previous year rather than wait until you file your tax return the following year. Although past performance is not a guarantee of future results, generally speaking, the longer your money is within your retirement account, the more time and opportunity is available for potential account growth.

(5) Do you need any additional help to implement your plans for the future?
A lawyer, an accountant, a stockbroker, and a trust officer can be a tremendous help in your financial matters. If you’re not progressing as you would like, or if you find you don’t have the time to manage your money properly, you should consider hiring a professional.