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The end of a year can be the perfect time to go through a financial planning checklist. All of those non-recurring financial tasks that you normally don’t think about every day, week, or month.
Most of us should be able to remember to pay our mortgage every month. And hopefully pay off the balance on our credit cards each month.
But what about those infrequent financial tasks? That is where the year end financial planning checklist comes in handy.
Here is a list of 5 things we are checking off our list before the new year begins. We’d love to hear what other things you are doing financially to prepare for an awesome New Year!
1. Increase 457 Pretax Contributions for 2019
One of our financial goals and tax optimization strategies for 2019 is to max out our 457 plan through my employer.
In 2018, we contributed $12,905 to my 457 pretax account. This allowed us to lower our taxable income … which has reduced our tax obligation for the same year (2018). By contributing income to this account, we will drive our federal tax bill down to $0!
Our goal is to do the same in 2019 … and actually max out the account this year. Last year, we could put up to $18,500 into our 457 plan.
Starting in 2019 the annual limits for 457 contributions have increased to $19,000. This means we will need to contribute $1,583.33 per month to hit the limit.
Part of our year end checklist is to increase my payroll contributions so we automatically hit the max.
So as part of our year end financial checklist … I notified my benefits department at work to increase my monthly contributions to $1,500 per month to our 457 plan.
That will get us up to $18,000 automatically through payroll deductions. The remaining $1,000 will be adjusted throughout the year as I will likely get a cost of living increase in a couple of months.
2. Adjust Our Tax Withholding
Even though we are planning to pay $0 in federal taxes in 2018 … we still had just over $4,000 taken out of my paycheck throughout the year.
Since I would like to have more of this money available when I get paid (instead of getting taken out of my paycheck) … I need to adjust my withholding for 2019.
We actually adjusted our withholding a couple times during 2018 to keep more of our paycheck … and still paid over $4,000.
The year end checklist for now is to make another slight adjustment for 2019 to keep more of our paycheck. These funds can then be used to help pay down debt and/or invest in taxable accounts … or even our Roth IRA accounts.
We still want to have some federal taxes taken out (to avoid any penalties) but just not as much.
3. Pay Our Property Taxes
One of my traditional year end financial rituals (since we have owned our house) is to pay our property taxes.
During the first couple years of home ownership … we paid money every month into an escrow account with our mortgage payments.
Our escrow account would then be used to pay our home owners insurance in February and our property taxes sometime between September and December.
But as I saw thousands and thousands of dollars going into our escrow account (and our lender earning interest on that money) … I wanted to take back control. So we started our own escrow account that we manage on our own … and earn a bit of interest ourselves.
Managing our own escrow account means that we are now responsible for paying our property taxes and homeowners insurance.
Our property taxes (usually around $4,000) are due September 30th each year. But we have the option of paying them no later than December 31st without penalty.
So for the past several years … we make our lump sum property tax payment the last week of December. This year is no exception.
Last year we added another really cool benefit of making this lump sum payment – earning travel rewards!
So for the second year in a row, we plan to leverage a brand new rewards credit card to pay our property taxes. This one payment will be enough on it’s own to hit the minimum spending requirement on the card to earn the rewards.
4. Create and Automate a New Onetime Expense Account
Speaking of making big lump sum payments throughout the year … we are in the process of setting up a checking account to pay for our big expenditures throughout the year.
Overall we have done a very good job budgeting for our recurring monthly expenses. Mortgage, car payments, cell phones, internet & phone, and utility bills are all handled easily through our budget.
The one area we struggle is to account for big onetime expenses that only occur once or at most twice a year.
We want a way to save up for them in an account that we can draw the funds from. And it needs to be automated.
Based on a years worth of spending data we have been collecting … we can now analyze these expenses and calculate how much we need to put away each month.
The list of annual expenses include –
- Property Taxes – paid once per year in December
- Homeowners Insurance – paid once per year in February
- Car Insurance – paid twice per year in June and December
- HOA Dues – paid twice per year in February and July
- Car Registration Fee’s – paid twice per year in January and June
- Beachbody Membership – paid in August
Overall, these expenses cost us around $7,000 per year. So starting in 2019, we plan to automatically deposit funds each month into a new checking account. The balance in the account will be used to pay for these items throughout the course of the year.
Each month we plan to deposit around $600 per month into this new account.
We need to take action now in 2018 so we can start off with our first deposit in January!
5. Estate Planning
This year end checklist item is somewhat new to us.
For years … my wife and I never really talked about or did anything with our estate planning. With the exception of having beneficiaries on our retirement and investment accounts … that has been the extent of our estate planning.
This next year we are getting our act together and meeting with a lawyer to draw up a Will & Trust. We should have our estate planning wrapped up by the end of the first quarter in 2019.
In the meantime, we are going through all of our assets and financial accounts … making sure beneficiary information is up to date and accurate.
I think this is a fantastic year end financial checklist item we need to work through annually. New accounts get opened and old ones closed from time to time … so beneficiaries or other important information can get missed.
In addition to working on our estate planning … we are also going through our Emergency Binder. This is basically a document that contains all important information about our lives.
The same financial accounts mentioned before are included in this document … along with passwords and user accounts for accessing them on-line. But in addition … we also include other accounts like – email, credit cards accounts, utility accounts, etc.
When we are all done … this binder will have everything my wife or I would need to know about how we run our lives. Or if another family member needed to act on our behalf for any reason … it helps them understand all of our accounts.
I just can’t believe it has taken us over 15 years of marriage to realize this now!
Making Year End Planning a Habit
This is really the first year we have made any kind of year end planning a priority.
Normally we would wait until the New Year would start and play catch-up with our finances. For example, not saving up for those big onetime large expenses can make some months in the year hard on our budget.
This list of checklist items we have laid out above are just a start to hopefully an annual year end habit of financial planning.
Our 2019 financial year end checklist will be a document we plan to continue using into 2020 and beyond … by adding new items when they come up.
Have you completed your year end financial checklist? What types of activities do you plan to take care of before the New Year begins?
