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Year End Planning

Year End Planning

December 17, 2019

Hard to believe it, but 2019 is nearly over! A lot has happened over the last year and with the holiday season wrapping up in the next few weeks, you are likely beginning to look ahead to 2020. As you begin to recuperate from the holiday craziness, here are 5 ideas of things you can do financially to review, look ahead, and plan for the coming year.

1) Update your Net Worth Statement

As your year-end statements start showing up, keep them and compile them. It is a good time to use that data to update your Net Worth statement. We typically like to see people update this important financial statement once a year. What better time to see where you're at than when you get all of your year-end balances! Once your Net Worth Statement is updated, what better time to review some other financial items such as ensuring your emergency fund is properly funded, determining whether you have a good mix of taxable and tax-advantaged liquidity in your accounts, and taking time to consider whether your retirement accounts are moving in the right direction for your financial goals.

2) Review your Spending Plan

The last few months of the year tend to be higher spending months with travel, gift buying, and less free outdoor activities (in the Midwest anyway). January is typically a time for fresh starts, New Year Resolutions, and it's also a good time to take a fresh look at your spending. Take some time to update your spending goals and work on your budget to start 2020, a new decade, on a good foot! Do you have any big purchases coming up this year? How about planning for those and starting to save now? For a good place to start, consider checking out our recent "How To Budget" blog post. 

3) Review your Investments and Reallocate as Needed

Again, with your year-end statements, you can look at how your investments performed in 2019 and make any reallocation decisions for the coming year. Do your investments match up with your risk tolerance? Do you know what kinds of returns you need to make your financial plan work or reach your financial goals? These are all things to consider when reviewing your investments and talking with your financial advisor is a good place to start.

4) Look at your Tax Withholding

A lot has changed over the last few years when it comes to income taxes. If you are still working or living off retirement income, it is always good to review how much you are having withheld for taxes each year. As you begin to prepare to file your income taxes, what better time to review your withholding, consult with your CPA, and adjust accordingly.

5) Review your Interest Rates

If you have any financial debt out there like 77% of Americans, consider looking at the interest rates you are paying. We live in a low interest rate environment right now, and you may be able to find ways to reduce some of the interest expense you are paying. Whether it is looking at refinancing your mortgage or consolidating credit card or student loan debt, there may be cost savings available to you.

By reviewing these things every year, you should have a good grasp on your financial situation leading into the new year. By knowing your numbers, you can set goals for the coming year and stay on top of any issues or surprises that may arise.

Happy Holidays!
- Compass Advisor & Owner, Caleb Pearson

Disclaimer: Content of this material is for general information only and not intended to provide specific advice or recommendations for any individual. Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.