You know that sumthin’ sumthin’ about Christmas and the year-end holidays that just makes you lose a bit (or a lot) of your financial mind and neglect your money a bit (or a lot)? That feeling that you don’t need to check your bank account or credit card statement until after the New year because… YOLO? And then the New year rolls around, you’re not exactly sure where you stand financially and you’re setting new money goals with no baseline to start from. I’ve been there…This is why a smart money move to make as a working woman and mom is to audit your past year’s finances before even considering setting new financial goals for the New Year.
Now more than ever, women’s finances are taking center stage. As revealed by a 2020 McKinsey and Company report, women are to be the primary wealth holders in the U.S. by 2030. According to this Lending Tree analysis, single women surpass singe men in home ownership. Women now run more than 10% of all Fortune 500 companies. This potential wealth transfer will cause American women to control much of baby boomers’ $30 trillion in assets. Needless to say, now is not the time to neglect your finances or mishandle your money.
If you are considering smart money moves to make as the New Year rolls around, here are a few financial boxes to check:
1. Do Your Financial Year-End Audit:
Reviewing your finances is one of the first steps to building a healthy financial house. From revisiting your budget to checking your holiday spending, taking some time to strategically go over your financial situation:
- Budget check: Check your budget for the past 12 months to better understand your spending patterns. This will allow you to adjust your budget for the new year as needed.
- Emergency fund check: Do you have 3 to 6 months of savings that could be applied to emergencies such as job losses or medical crisis? If not, reconsider your savings patterns and adjust your goals for the new year.
- Debt check: Where is your debt standing at the moment? Have you been making a dent in it, or has it been increasing? Itemize your debt, see how much progress you’ve been making in the past year, and what you have left to tackle in the next few years.
- Benefits check: What is the current status of your retirement, health or insurance benefits? Have you been contributing enough to grow these sustainably? Are you taking advantage of matches offered by your employer if any? If not, can you pivot next year? Can you use any remaining funds in your Flexible Spending Accounts (FSAs) prior to them expiring? Are there other unused work benefits such as reimbursement programs or stipends you can still take care of?
- Holiday spending: This one may hurt a bit. It’s easy to get off track with holiday spending, hence the need to review it at year-end. Where did you get off budget? Did you even have a budget to begin with? What could you have done differently? Are there any discounts or cash back opportunities you can still use for last-minute purchases or returns?
2. Evaluate your investments and retirement accounts:
Evaluating your investments and retirement accounts allows you to ensure your money is not only growing well, but is being used optimally over time. This is where reviewing your retirement, investments and kids’ college savings plans can make a world of difference.
- Retirement Contributions: Have you contributed enough to your IRA or 401(k) to optimize your tax benefits and maximize employer matches?
- Investments: Where does your investment portfolio stand? Does it align with your financial goals and the amount of risk you’re willing to tolerate? If not, how can you modify your approach going forward? Is your money invested in high-yield savings accounts or just sitting in a zero yield account?
- College savings plan: As a working mom, have you set you set up and contributed to a 529 plan for your children’s education? If so, have you been able to take advantage of state tax benefits?
3. Plan for the upcoming tax season:
Taxes are not going anywhere, so you might as well plan early for them. Much of the burden of leveraging tax season is spending the necessary time planning for it before it is time to file. If anything, it may just be one of the smartest one money moves you can do as a year closes and another one opens. Here are some steps to do so:
- Tax deductions and credits: What are potential tax deductions and credits you can take advantage of in the upcoming tax season? These could be childcare expenses, medical costs, or student loan interest. As a working parent, can you identify tax credits such as the Child Tax Credit that you can also leverage in your taxes.
- Charitable donations: Now is the time to make last-minute charitable giving your go-to in order to increase your tax deductions. This will also help you declutter and streamline your belongings or finances before the year closes.
- Tax documentation: Rather than waiting until the last minute, year-end is one of the best times to gather your tax documentation. This may include purchase receipts, W-2s, and other tax documents to prepare for tax season and even file early.
4. Set your financial goals for the upcoming decade, not just year:
Reviewing your finances is one thing, moving forward is another. Setting measurable, specific goals for the future is a non-negotiable as you close one year and stepping into another. When it comes to your money, planning for the future is not just limited to the next year. Instead, painting a wider, more long-term financial picture can help you progress more effectively towards establishing a long-term legacy and not just meeting short-term objectives. So how about planning for the next decade and not just the next year? Here are some tips to do so:
- Financial goals: What are your financial goals going forward (e.g., paying off debt, increasing retirement contributions, ? Have you done your estate planning? If so, is it in need of reviewing? What is your wealth plan for the next year, five years, decade?
- Insurance Policies: Do you have adequate health, disability and life insurance coverage? Is it time to re-evaluate these for your current and future financial standing?
- Estate Planning: Are your wills and beneficiaries already set, especially as a working mom? If not, can it be part of your financial goals for the coming year? If they’re already set up, do they need updating?
- Financial Check-in: Plan to meet with a financial specialist or advisor to review your financial goals and strategy in the next year.
- Plan to involve your family and kids in the process: Teach financial habits to your family and kids. Set up or review their existing savings accounts. Encourage your children to donate or contribute to charitable giving.
Yes, the transition from one year to another is not the easiest time to set your finances in forward motion. However, there is never a good time to do what is best and most challenging for our current and future financial well-being. Using this transition time to take control of your finances is not only one of the smartest money moves you can make. It may just be the most important thing you do to change your financial picture for decades to come.
Are you making smart money moves this year-end?
The Corporate Sis.
