So toward that end, I’m going to provide you with an end-of-year list. This one won’t be quite as frivolous as the ones you can read on the web. And there won’t be pretty pictures of celebrities, cats, or dogs. But I will venture to say that it’ll make life a lot easier for yourself and your loved ones. It may save you money and may get you a better night’s sleep.
The 10 Things You Should Do Before the End of the Year
(or after New Year’s if you can’t get it done sooner)
1. Put together a rough itemization of where you spent your money this year. Deal with the big stuff first (mortgage/rent, debts, lattes, etc.) then look at one or two month’s expenditures on groceries, gas, and other expenses like that. Then add in the occasional purchase. Approximate, don’t calculate. And don’t think of it as a diet, it’s a guestimate.
2. Figure out if you spent more than you received. Celebrate if you came out ahead, Think about what you can do differently if you spent more than your income.
3. Contribute to your grandchild’s 529 plan (if there isn’t one, set one up). It’s easy to do and the reward is priceless. Plan to be around for your grandchild’s college graduation so you can see where that 529 money went.
4. If you or your partner are approaching 70, talk to someone about the required minimum distributions you’ll have to take from your retirement accounts in the year you reach 70 ½. “Required” is the operative word here. The penalties for not doing so are steep.
5. If you can, and you expect your income to go down next year, pay your January mortgage payment by December 31st. Then you’ll be able to deduct the mortgage interest from this year’s taxes. It may save you a few bucks.
6. Add up all your assets. Yup, I really mean that. It’s not as hard as it sounds. In fact, it’s kind of fun. But also scary, rewarding, unsettling, and illuminating. Chances are if you have any money invested in the stock market, you’re probably ahead of where you were last year. That’ll make you feel good. I always like feeling good.
7. Share this information with your partner. Make sure you both have a glass of your favorite beverages.
8. Show your partner the budget you made up in step 1. If you’ve been adding to your assets and if you realize you’re spending less than your income, have a second glass of your favorite beverage. If you’re under water with spending, hold off on that second beverage.
9. Take the number you came up with in step 6 (your total assets) and figure out how much it will grow at a return of 5% per year. If you’re still working, think about how long until you retire. Then figure out how much in assets you’ll have then. Doesn’t sound like enough, does it? Hmmm, so then you probably need to add to those assets now while you still have some income.
10. Show your partner the results you just got in step 9, that is, what you’ll be worth when you retire. If you’re one of the lucky ones, you’ll be able to nod your head and have a nice dinner to go along with that beverage. But if you’re like most of us, that number is gonna cause some headshaking. And a good, honest conversation with your partner about your future.
After all is said and done, enjoy your New Year’s Eve party. And enjoy spending time with friends and loved ones. Happy New Year.