Year-end Personal Finance Checklist

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The leaves are changing, and that should serve as a timely reminder that with the year winding down it’s a smart idea to review your finances. You don’t have to spend all weekend balancing your checkbook or number-crunching your budget. Just do a quick check-up and overview to make sure that everything is current, orderly, and appropriate.

After all, we are talking about your money and holiday shopping is right around the corner. Those who don’t stop for a moment to evaluate where they stand financially could run the risk of miscalculating and wind up starting the new year facing a pile of bills. On the other hand, you may review your finances and find some unexpected positive surprises; maybe you’re saving more than you realized or perhaps you’ll spot unnecessary expenses that you can painlessly trim in order to free up more cash.

Is Your Budget on Autopilot?

  • If you have a account to track your budget and finances, has it been a while since you logged in and made sure that it was updated? Forgetting to do so will put you behind your actual bank account data.
  • During the year your finances have probably evolved in one way or another. The budget you drew up a year or two ago may need a few tweaks to ensure that it is still a custom fit for you and your lifestyle. Use excel when building these types of lists.
  • While it may only take a few minutes to review your budget, the results might serve you better for many months, and that makes it a wise, worthwhile investment of your time and energy.

Update Your Plastic

  • Check out offers from other card companies and do some comparison shopping. How long have you been carrying around the same credit card? Is it still the best choice based on your current spending patterns and needs?
  • What about the interest rate on your card and the fees charged for balances transfers or cash advances? Analyze the terms and conditions of your card compared to what is available out there and you may discover that you can save a whole lot more money while taking advantage of perks your existing card doesn’t deliver. Take a look at card options your current bank offers and see if you can switch cards.
  • It may not be a wise decision to cancel the old card, though, because the longer you have a credit account, the more it contributes to a higher credit score. Instead, you can just stash it away in a safe place and only use it often enough to ensure that the account remains activated.

Password Protection

  • One of the simplest things you can do to protect yourself from identity theft is to refresh your passwords on a regular basis, so add that to your to-do list as well. You want to use different passwords for each of your accounts, too, so that if one gets hacked it won’t give the thieves the keys to all of your accounts and financial data.
  • Security experts recommend that your password include both letters of the alphabet and numerical digits and be 12 or 13 characters long. Memorizing a random string of digits can be difficult, so a good way to construct passwords that are strong but easier to remember is to create an actual phrase.
  • An example of a password that is an alphabetical and numerical phrase might be “six times I ate three pizzas” (6XIAte3Pizzas) or “nine eleven year olds jump” (911yroldsjump).

Mortgage Management

  • Interest rates are on the rise, so this might be the year for you to lock in a lower rate through a smart mortgage refinance. Calculate the monthly savings. Then add up all of the refinance fees and closing costs. Divide those total costs by your savings to find out how many months it will take to break even.
  • If you can shave $100 off your current mortgage payment and the closing costs add up to $1,200, for example, then it will take you 12 months to break even. After that you’ll capture net savings of $100 per month for the life of the loan.
  • Also check to see if you are paying a PMI premium, which is a kind of mortgage insurance fee imposed by banks when homeowners have less than 20% equity. If your equity has grown you may no longer be required to pay it, and you can ask to have that fee dropped. That could save around $70 a month on a typical $200,000 mortgage.

Stocks and Bonds

  • Those who own stocks and bonds should definitely review their portfolios to see if they are adequately diversified, especially since interest rates and stocks have risen considerably over the past year.
  • Are the fees you’re paying to have mutual funds managed worth it, or are they undercutting your profits? You may be better off shifting those funds into a less costly Exchange Traded Fund or ETF.
  • What about the tax implications of your stock trades? If you need to post some capital gains and losses and use those as IRS deductions, now is the time to sell your under performing stocks. The trades need to settle before January 1st, so don’t procrastinate or you may lose your opportunity.

Retirement, Insurance, and Wills

  • How about your contributions to your IRA account? Can you afford to boost them by a few dollars a month? You may also want to start using a credit card that allows you to earn cash back that is swept directly into your retirement fund. Every time you raise your contribution it helps to grow your retirement wealth, and every dollar counts.
  • An annual review of insurance is a must, because many Americans are either over-insured and paying too much or they are under-insured and exposed to serious liability. Review your policies, talk to your agent, and adjust your coverage as needed. Be sure to ask about potential savings from bundling your policies, too, because those can be substantial.
  • The same goes for your Last Will and Testament. Have you acquired property, divorced, or added some new relatives to your family tree through births and marriages? The document you created some time ago may be a little outdated.

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