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7 Financial Steps To Take Before The Year Is Over

Article by Scott Spann | Found on Forbes

It’s safe to say that you will start to hear a lot of talk about New Year’s resolutions over the course of the next few weeks. Since money and wealth are integrated into many aspects of the life journey, it isn’t too surprising that financial resolutions are generally near the top of those well-intentioned “to do” lists for the new year. But if you’re like me, you’ve broken most of them before Groundhog Day.

That’s why this year I’ve decided to make and keep some New Year’s resolutions before the new year even starts. That’s my financial holiday gift to myself. Here are some actions you can take before the year is over as an opportunity to make sure you are doing everything to improve your own financial wellness during 2018 (and beyond):

Create a plan to aggressively fund your savings account. Over the past year, I’ve met with many individuals and families who are dealing with some major life changes and challenges that have made the emergency safety net a necessity. This may seem like a basic step, but most households report being woefully off track with this fundamental financial goal. According to a Federal Reserve report on financial well-being, less than half of U.S. households have enough savings to cover a $400 emergency without using credit or relying on friends and family.

A general guideline is to keep around 3-6 months of basic living expenses in an emergency savings fund. Some people are better suited maintaining an emergency savings fund of 6-12 months of living expenses (especially those in an uncertain job situation or with concerns about the economy). If paying off debt is a current priority, you should at least maintain a starter emergency fund of around $1k-2k even if you are in debt reduction mode. In addition, consider contributing to a Roth IRA or HSA since these accounts provide tax advantages and may also be considered a supplemental part of your emergency fund. Just be sure to keep your core emergency savings in relatively stable, liquid assets that are not subject to market volatility.

Review your income tax withholding. Are you looking for a quick and easy way to increase your take-home pay so you can free up extra dollars to save in 2018? You may need to adjust your income tax withholding if you’ve had any changes in your income or expenses so far this year or if you’ve received a large tax refund in the past and you’re tired of loaning your money to Uncle Sam at zero interest. It may seem easy to continue with this forced savings program right now, but with a little discipline and a few simple changes to your Form W-4, you can put that money from your upcoming paychecks to work for you right now rather than waiting to file your tax return. For a calculator you can use to figure out your recommended tax withholding, visit the IRS withholding calculator or this alternative version from TurboTax.

You may also want to proactively prepare for the pending changes related to the tax reform bill while the final details are still being sorted out. One certainty is the need to adjust your tax withholding based on the projected changes. Stay tuned to the final version of the House and Senate bills. Tax calculators like this one from Tax Act can help you see how your tax situation may be affected by this new legislation.

Establish a separate savings or checking account for irregular expenses. It may be too late to save for travel expenses over the holidays if you do not already have a plan in place. However, it’s not too late to start planning for upcoming vacations or to start setting aside money for the 2018 holiday season or annual expenses such as taxes and insurance.

This is where a planned spending account comes into play. You probably have heard of this concept a time or two before, but not everyone has a formal plan in place to prepare for irregular expenses. In fact, these non-systematic expenses are usually the ones that can blow up a budget and create financial stress.

This effective money management technique simply requires us to create a separate account for those expenses that don’t occur on a regular basis but still belong in your personal spending plan. Rather than turning the calendar to December and wondering how to pay for those holiday gifts, taxes, insurance, HOA dues, etc., you can go ahead and work them into your spending plan right now. For more information on setting up a planned spending account system, check out 5 Steps to Successful Money Management.

Schedule a “money talk” with a spouse, significant other, or friend. It is important to have regular conversations about your financial goals if you are married or in a committed relationship. Regardless of your money personality or who normally handles different financial roles (paying bills, spending money, investing, planning, etc.), regular money dates can help couples overcome prior roadblocks to working together as a team. If you do not have a financial planning partner or your significant other is creating significant roadblocks on your path to financial freedom, you can reach out to a trusted friend or family member to serve as your accountability partner or voice of reason. Then again, some of our friends aren’t the best models of financial responsibility so you can always reach out to a CERTIFIED FINANCIAL PLANNER™ professional or financial wellness coach for additional guidance.

Review your membership accounts and subscription fees. With all of the different account subscriptions and memberships that we maintain in today’s connected world, it is easy to lose track of the actual costs of these conveniences. That is why it’s advisable to complete an annual inventory of these type of accounts. As a result, Amazon Prime, Netflix, Hulu, Spotify, etc. each have to answer the same question at least once every six months – are you still worth keeping?

Verify your debt reduction plan is on track. Not surprisingly, debt consistently remains at the top of the list of obstacles holding people back from reaching their important goals like retirement or simply building up savings. Our latest research suggests that many households are still in need of a plan to reduce or eliminate high interest debt.

If debt reduction is near the top of your financial to-do list for next year, check out our Debt Blaster Calculator to see if you are on track to get those credit card balances and other creditors out of your life. If you don’t have a plan, your new year financial checkup should provide you with an excellent place to start. Check out these 5 Steps to Getting and Staying out of Debt for some tips on creating a game plan.

Re-balance your investment portfolio. One investment best practice behavior that most financial professionals recommend is to re-balance your portfolio on at least an annual basis. If you haven’t reset your target asset allocation for current and future investments, the end of the year is an ideal time to do so. Take advantage of automatic re-balancing if it’s available through a retirement plan at work to simplify this process with a click of the button. While you are examining your retirement portfolio, you can also review your answers to important questions about the status of your own retirement plans.

Taking all seven steps between now and the end of the year is an unlikely goal for most of us. But a little dose of financial awareness during the busy holiday season can provide you with lasting gifts of financial wellness. Try choosing 1-2 of these action steps and commit to checking them off your “to do” list. Don’t wait until next week or next year to start turning those good intentions of yours into a meaningful financial life plan!


Isler Northwest LLC is a firm of certified public accountants and business advisors based in Portland, Oregon. Our local, regional, and global resources, our expertise, and our emphasis on innovative solutions and continuity create value for our clients. Our service goals at Isler NW is to earn our clients’ trust as their primary business and financial advisors.

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