Helpful Financial Planning And Budgeting Advice For The New Year

By Vivian Wagner. May 7th 2016

The end of the year is a great time to review your finances. It's an opportunity to look at your accounts, determine what needs to be changed and make plans for the future.

Here are 10 tasks you can tackle now to put yourself on track financially for the new year.

Take Stock Of Your Retirement Accounts

Now is the time to look at your 401(k), IRAs and other retirement accounts to see how they've been performing over the prior year and determine what you might need to adjust. If one sector has done particularly well, for instance, you might need to rebalance your holdings to ensure that your asset allocation is what you want it to be.

If a portion of your portfolio is underperforming, however, don't automatically unload it. Markets are cyclical, and often the worst thing you can do is sell stocks or other investments when they're at a low point. The best thing you can do is to develop an asset allocation strategy and then stick with it, rebalancing your account at the end of each year so that your allocation stays on course. (To learn more, see What You Need To Know About An IRA Investment.)

Review Your Beneficiaries

Things change during a year. Babies are born or adopted, kids graduate from high school and marriages begin or end. Therefore, you need to periodically review and update the beneficiaries on all of your accounts, including savings, retirement and life insurance. Check online or speak to a customer service representative to obtain a beneficiary change form for each account.

Update Your Insurance

Life changes also lead to new insurance needs. Evaluate your life insurance and make sure you have enough coverage. Determine whether you need all the bells and whistles on your car insurance. Think about whether you need to raise or lower your deductibles. If you need help understanding the options with your insurance, talk to a financial adviser or a representative of your insurance company for help and advice. (For more information, see How Much Car Insurance Do You Need?)

Save Or Invest Bonuses

It might be tempting to spend your year-end bonus, but consider saving or investing at least part of it. Putting it in a vacation fund is a good way to make putting aside the money easier. You can also use it to pay down credit cards or other debt.

Examine Fees And Interest Rates

Look back over your statements from credit cards, bank accounts and other accounts and determine their fees and interest rates. Now's a good time to shop around to see if you can find better fees and rates elsewhere. (To learn more, check out A Guide To Switching Banks.)

Check Into Refinancing

Sometimes it's easy to let your home loan go along on auto-pilot, ignoring the money that can be saved through refinancing. Research current rates and use an online mortgage calculator to determine if refinancing might be right for you. Then talk to the bank or a mortgage broker to start the process. Remember that it doesn’t always make sense to refinance your mortgage. (For more information on why you might not want to refinance, see Reasons Not To Refinance Your Mortgage.)

Analyze Your Monthly Income

Look back over the year at your monthly income. Is it enough, given your spending habits and needs? Are there ways to raise your income? Consider asking for a raise or developing a consulting business on the side. Increasing your monthly income is one way of making yourself more financially fit.

Examine Your Spending

Now is also a good time to go back over your spending for the year. Determine how much you're spending in a variety of areas including housing, utilities, food, medical care, entertainment, travel and incidentals. You can use software like Quicken, or you can do your analysis by hand. However you do it, taking a cold, hard look at your spending will help you to see what you spend, when you spend it and how you can cut back.

Adjust Income Tax Withholding

As you complete your tax returns for the prior year, you'll discover ways that you can adjust your income tax withholding. If you get a large refund, for instance, you might consider decreasing your withholding. On the other hand, if you owe a significant amount in taxes, you may wish to consider withholding more in the coming year. (For more on withholding, see A Tax Guide To Payroll Withholding.)

Make Financial Resolutions

The end of one year and the beginning of a new one is also a good time to make financial resolutions. The best way to make these resolutions is to consider your priorities. Money is only valuable, after all, because of what it lets you do. Think about what you want to do in the coming year and in the long-term. Do you want to send your kids to college? Take more vacations? Live more simply? Work at home? Have a comfortable retirement? Think about your short- and long-term goals, and then come up with financial resolutions that will help you to achieve them.

These tips should help you to get a great financial start to the new year. Remember that there is always room for improvement and reevaluation when it comes to your personal finances.

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