Never Ignore These Elements in Your Year-End Financial Checklist

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Year-end financial planning is a time to make smart money moves. Learn powerful ways to boost your savings, pay off debt, and invest for retirement. 

It’s never too late to improve your personal finances, and sometimes the best time to start is the end of the year. There are lots of smart year-end money moves you can make to reduce your taxes, pay off debt, save more for retirement or other financial goals, and strengthen your financial foundation for the future.

Here are a few must-have elements in your year-end financial planning checklist.

1. Check on your emergency savings

During recent high inflation and post-pandemic “revenge spending,” many Americans are discovering that they have depleted their savings. The end of the year is a great opportunity to take stock of your emergency savings fund; you should ideally have at least three to six months’ worth of essential expenses. Use our emergency savings fund calculator to see how this looks for your monthly spending.

Keep your emergency savings in cash — not in stocks or other investments that could lose value in the short term. And if your savings are sitting in a bank account that pays near-zero interest, it’s time to shift your emergency fund to a high-yield savings account to earn 5% APY (or higher).

If you don’t have an emergency savings fund, you’re not alone. Many Americans — even high earners — are living paycheck to paycheck, and don’t have $500 for an emergency. But now is a great time to start saving. Find room in your monthly budget to automatically transfer $50 per month into an emergency savings account. At the end of next year, you’ll have $600 saved! And ideally your savings momentum will grow from there.

If you struggle to save money, try an automated savings app Oportun (formerly Digit). This app (with your permission) will automatically move small amounts of money into your savings account, based on your everyday spending patterns. You can boost your savings without even noticing!

2. Pay off high-interest debt

If you have credit card debt, or other high-interest, non-mortgage debt, now is the time to make a plan to pay it off. The best debt payoff apps can help you choose a payback strategy, see how long it will take to become debt-free, and even automatically send your money to savings or debt balances each month, so you don’t have to think about it.

Want a quick way to save money on credit card interest? Consider a balance transfer credit card to help get out of debt. If your credit score is good enough to qualify, these cards can give you 0% APR for 12 months (or more), which reduces your interest charges and gives you some breathing space to pay off debt faster.

3. Save more money for retirement

The end of the year is a perfect time to think about how much you’re saving for retirement, and boost your retirement savings contributions. Here are four quick moves you can make at year-end to save more for retirement.

Boost your 401(k) contributions

If you have a 401(k) or other employer-sponsored retirement account at work, you should probably be putting money into it. If your employer offers a 401(k) match, be sure to contribute at least enough to get that full matching amount. For example, your employer might offer to match 50% of the first 6% of your salary that you put into your 401(k). If your salary is $60,000, getting that full match gives you an extra $1,800 of “free money” for retirement. Your 401(k) match is part of your compensation, and you deserve to get the full amount, just like you deserve to take all your vacation days. Don’t throw it away.

Use a traditional IRA for extra retirement savings

Your company’s 401(k) isn’t the only way to save for retirement. Even if you’re maxing out your 401(k) at work, you can put up to an extra $6,500 for 2023 ($7,500 for people age 50 and up) into an individual retirement account (IRA). Depending on your income and filing status, your traditional IRA contribution can be tax deductible.

Consider opening a Roth IRA

Depending on your income and life stage, even if you’re already maxing out your 401(k) at work, you might want to consider opening a Roth IRA. The Roth IRA (unlike a traditional IRA) lets you save money for retirement with after-tax dollars. You don’t get a tax deduction for your Roth IRA contributions like you do for a typical 401(k) or traditional IRA. Instead, your Roth IRA money grows tax-free — and gives you tax-free income in retirement.

Age 50 or over? Make catch-up contributions

If you’re in the 50-and-over age group, the IRS wants you to save more money for retirement. You can save an extra $7,500 per year in your 401(k) or an extra $1,000 in an IRA. These are called catch-up contributions and they can help you boost your retirement savings while reducing your taxable income.

Bottom line: Putting more money into savings, getting rid of credit card debt, and boosting your retirement accounts can help strengthen your financial security. Doing some year-end financial planning can help you clarify your financial goals, prioritize how you want to spend (and save) your money, and look forward to the future with confidence.

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