Jan 11, 2024
The 2024 Financial Checklist: A Guide to a Confident New Year
The start of a new year is the perfect time to take a comprehensive look at your finances, reviewing how things shook out over the last 12 months and setting yourself up to meet your financial goals as a new year dawns. Personal financial planning is more than just numbers; it’s about gaining control, preparing for the unexpected, and paving a path toward your ideal future. Whether it’s managing daily expenses, preparing for emergencies, or setting your sights on long-term aspirations, creating a well-thought-out financial plan can be both empowering and, believe it or not, enjoyable.
There are many components of personal finance, and the specific areas of financial planning that matter to you depend on your unique circumstances. Whether you want to focus on five, seven, or ten elements of a financial plan for 2024, taking a look at your entire financial picture can give you the knowledge and resources you need to tackle your priorities. Read on for a comprehensive financial planning checklist to organize and streamline your approach to a prosperous 2024.
Elements of your financial planning checklist:
- A financial check-up
- Emergency fund
- Credit score
- Tax preparation
- Retirement plans
- Family and estate planning
- Financial goals
- Your 2024 budget
1. Take stock of your personal finances
Start the new year off on the right foot with a thorough assessment of your current financial status. Think of it as a financial health check-up to get a clear picture of where you stand. Review the components of your financial planning, including your income, expenses, assets, and liabilities to understand your financial strengths and potential areas for improvement. This baseline assessment will help you set realistic and achievable financial goals for the year ahead.
Last year’s expenses
How did you spend your money over the last year? Examine your bank statements and credit card bills, group your expenses into categories, and note areas where you spent more than planned. Identify any unexpected costs and consider how you could plan for similar situations in the future. This detailed assessment will provide you with clarity about how much money you actually need to sustain your lifestyle and help you make more informed spending decisions in 2024.
Last year’s budget
Evaluate the effectiveness of last year’s budget. Did you regularly overspend in certain categories? Were there areas where you consistently spent less than planned? Understanding these patterns will help you adjust your budget for the new year and align it with your actual spending habits and financial goals. And if you didn’t use a budget last year, don’t worry: completing this financial planning checklist will set you up to make one for 2024.
Current assets and liabilities
List all your assets, including cash in bank accounts, investments, retirement savings, and any real estate equity. Then, detail your liabilities, such as credit card debt, a mortgage, student loans, and any other debt like auto or personal loans. Calculate your net worth by subtracting liabilities from assets to get a snapshot of your overall financial health.
Estimate your expected income for the coming year. Start with your earnings from the previous year and adjust for any known changes, such as salary changes, bonuses, or changes in tax bracket. If you’re planning to pick up a side hustle, try to project how much it will bring in, being sure to account for additional taxes you’ll have to pay. This projection will be the foundation for your budgeting and financial plan for 2024.
Revisit your existing financial plan, if you have one, to see if it still reflects your current financial situation, lifestyle, and aspirations. Make adjustments as needed, considering both the coming year and your long-term financial goals. If you don’t have a financial plan, you’ll have everything you need to create one using the insights you develop as you move through your financial checklist.
2. Check in on your emergency fund
An emergency fund is a dedicated savings account to cover unexpected expenses or financial emergencies, such as sudden medical bills or job loss. Regularly evaluating your emergency fund is important for ensuring you’ve saved enough to provide financial security in times of need and sustain you through unforeseen events without going into debt.
Make sure the target goal you’ve set for your emergency fund target still makes sense for your lifestyle. Have your income or expenses changed over the last year? If so, adjust your savings goal to reflect your current circumstances. While the whole point of an emergency fund is to cover unexpected costs, you can anticipate potential sources of emergencies and tuck money away from them. For instance, did you adopt a new pet, have a child, purchase a house, or buy a used car? Those are all potential sources of large expenses you can’t predict, so you might want to pad your emergency savings goal accordingly.
How much money is in your emergency fund now? Is it enough to cover at least six months of living expenses if you were to lose your income? Did you spend money out of your emergency savings in 2023? Determine how much you’ll need to put aside each month in 2024 to build your fund up to your target goal.
Where you store your savings can make a big impact on its growth. Take a look at the type of account where your emergency fund is kept. Is it in a regular savings account, a high-yield savings account, or a money market account? Review the interest rate you’re earning and explore options for better returns in 2024 so your emergency fund continues to grow effectively.
3. Assess your debt situation
Effectively managing your debt is a key step in your financial checklist. Paying off debt as soon as possible, and specifically prioritizing your high-interest debt first, can significantly reduce the total interest paid over time and free up financial resources for other goals. Focusing on debts with the highest interest rates not only lessens your overall financial burden but can also positively impact your credit score and overall financial wellness.
Credit card debt
List all your credit card balances, along with the interest rates and minimum monthly payments for each. This will help you understand the total debt and prioritize which balances to pay off first. If you have multiple cards with high-interest rates, you might research options for consolidating it all onto a card with a lower interest rate. However, be aware that there’s usually a fee to transfer balances, and you might not qualify for the lowest rates if your credit score isn’t excellent. And even if you can get a very low-interest rate, there are pitfalls: those introductory offers usually expire after a certain amount of time, and if you’re late on even one payment, you’ll likely lose the great rate.
Auto and personal loans
Detail your auto and personal loans, including their interest rates and terms, and calculate the total interest you’ll pay over the life of these loans. Consider whether you could afford to pay more than the minimum each month to reduce your overall interest expense and help you become debt-free sooner.
Student loan debt
Document all your student loans, noting their interest rates and repayment timelines. Look into any potential student loan relief programs or refinancing options that could help you pay them off faster. If your loans have been in forbearance or deferment during 2023, make sure you know when those relief plans end and your payments will resume.
If you have a mortgage, review your current loan balance, equity, and interest rate. You might want to shop around for current refinancing interest rates to see if you could get a lower rate than what you’re paying now, but be aware that refinancing comes with costs that can add to your debt. You could also consider if there’s room in your budget to make extra principal payments in 2024. One simple way to do so is to pay your mortgage biweekly instead of monthly. With this approach, you pay half your mortgage payment every two weeks; because there are 52 weeks in a year, you wind up making the equivalent of one extra full monthly payment per year.
List out all your other debts, such as buy-now, pay-later plans or things you’re paying for in installments, like if the cost of your most recent cell phone is wrapped into your monthly bill. If you owe money to friends or family, make a note of it too. These debts, while they might be smaller, can add up and should be part of your overall debt management plan.
Debt payoff plans
Create a strategy for paying off high-interest debt. Consider methods like the debt avalanche or snowball approach. Focus on balances with high or variable interest rates first, like credit cards and personal loans. While it may be enticing to tackle larger debts like student loans and mortgages, they usually have lower rates than things like credit cards. Plus, remember that your mortgage interest can be a tax deduction. Paying off high-interest debts first can be more effective in reducing how much money you spend on interest overall.
4. Inspect your insurance
Yes, insurance belongs on your financial planning checklist. Take time to examine your various insurance policies to see if they still align with your current and anticipated future needs. This ensures that you’re adequately protected while also identifying areas where you might be able to optimize coverage or reduce costs.
|Stash tip: Protect what you have. Insurance is an often overlooked part of financial health. Whether it’s adequate health insurance, car insurance, homeowners, life or disability, set yourself up for unexpected life events.
Flexible spending account (FSA)
A flexible spending account (FSA) is a tax-advantaged account offered by some employers, which you can use to pay for specific healthcare expenses. It’s funded with pre-tax money, thereby reducing your taxable income. Typically, you have to use the funds in your FSA within the plan year, often by December 31, but some employers offer a grace period extending this deadline. If you have the option to contribute to an FSA through your employer, plan your 2024 contributions based on anticipated medical expenses so you can make sure to use this benefit effectively.
Health savings account (HSA)
A health savings account (HSA) is another tax-advantaged account offered by employers designed to help you save on medical expenses. Unlike an FSA, funds in an HSA roll over from year to year, so there’s no pressure to spend the balance within a specific timeframe. If you have any outstanding medical expenses from 2023, now is the time to submit them to your HSA for reimbursement. Looking ahead, consider your expected healthcare costs for 2024 to determine how much to contribute to your HSA and maximize its benefits.
|Stash tips: Healthcare-related costs are retirees’ largest annual expense. Consider investing in a Health Savings Account (HSA) if you have access to a high-deductible health plan. They have great tax benefits and will help offset those large expenses in your golden years.
Health insurance deductible
Be aware that health insurance deductibles typically reset at the beginning of the year. Know your deductible amount and budget for medical expenses you’ll need to cover until the deductible is met. Now’s also a good time to look over your health insurance plan so you know which costs are and aren’t subject to the deductible; for example, many plans don’t count preventative care or visits to your primary provider toward the deductible, so you just have to cover the copay.
Disability and life insurance
Take a moment to review your disability and life insurance policies. Be sure you know the coverage details, who your beneficiary is, and the cost of premiums and deductibles. You might want to adjust your coverage based on how your life has changed since you took out the policy, such as the addition of a new family member or a change in income. Even if you’re not directly paying for a plan, your employer might provide one as part of your benefits package, and you’ll want to be aware of what it entails.
Evaluate your homeowners or renters insurance coverage and verify that it’s sufficient to cover your current living situation and possessions. If you’ve made home improvements or purchased expensive items in the last year, you might need more coverage; conversely, if you’ve downsized you may want a less expensive plan. As 2024 approaches, it might be time to shop around for better rates or inquire about loyalty discounts and bundling options with your current provider.
Similarly, review your car insurance coverage and compare it to your current needs. For instance, if you were carrying full coverage because you’d financed your car and have now paid it off, you have the freedom to consider a lower tier of coverage if you want to save money. Look for opportunities to reduce rates or secure discounts; many insurance companies offer multi-policy discounts if you also buy your homeowners, renters, and/or life insurance policies from them.
5. Review your investment portfolio
Regularly examining your investment portfolio is an essential part of your annual financial planning checklist. This allows you to monitor the performance of your investments, ensuring they align with your financial goals and risk tolerance. Periodic check-ins also provide an opportunity to adjust your strategy in response to market changes or personal life events, so you can maintain a balanced investment strategy that supports your long-term financial plan.
Evaluate the performance of your various investments over the past year, comparing them against historical trends to identify any assets that are either underperforming or exceeding expectations. Remember to take the long view on your investment strategy. Avoid making hasty decisions based on short-term market dips; instead, consider the benefits of a buy-and-hold approach, which often yields better results over time.
Asset allocation refers to the way your investments are distributed across different asset classes, such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Assess whether your portfolio’s allocation aligns with your goals, risk tolerance, and investment timeline. Different risk profiles require different balances of stocks, bonds, and other assets. For instance, a more aggressive profile might have a higher proportion of stocks for potential growth, while a conservative profile might lean more toward bonds for stability. As you get closer to retirement, it’s common to shift toward a more conservative approach. Regularly reviewing and adjusting your asset allocation helps keep your investment strategy on track with your evolving financial plan.
If your portfolio’s asset allocation has shifted away from your target, it may be time to rebalance. This process involves moving funds among different investments to maintain the right mix for your strategy across various asset types, sectors, and industries. Rebalancing your portfolio can also help make sure your portfolio remains diversified to reduce risk.
6. Check your credit score
Your credit score is vital to your financial health because it influences the interest rates you receive on mortgages, car loans, and credit cards. Even if taking out loans or lines of credit isn’t in your 2024 financial plan, checking your score still belongs on your financial checklist; your credit score can affect your insurance rates, ability to rent an apartment, and how much of a deposit is required when you sign up for utilities. In some cases, it may even be considered by employers when you apply for a job. Regularly checking your credit reports is essential to ensure accuracy and to safeguard against identity theft or errors.
The three major credit reporting agencies (Equifax, Experian, and TransUnion) each provide a free credit report annually; all you have to do is request it. A credit report details your credit history, while your credit score is a numerical representation of your creditworthiness based on that history. Note that your credit reports won’t necessarily tell you your credit score, but your bank or credit card issuer might provide that information free of charge.
Credit report accuracy
Your reports will show activity like the loans and credit cards you have, the times when creditors have checked your credit, any late payments or accounts that have been sent to collections, and legal activity like whether you’ve been sued, arrested, or filed for bankruptcy. Make sure everything on your report from each agency is accurate. If you see activity that’s incorrect, it may be a sign of fraud or identity theft, and you’ll want to contact the credit reporting agency right away to get errors rectified so they don’t undermine your credit score.
Credit score improvement plans
Credit scores are categorized as follows: poor (300-579), fair (580-669), good (670-739), very good (740-799), and excellent (800-850). If your score falls into one of the three lower tiers, you might want to put raising your credit score on your 2024 financial plan. There are a number of steps you can take, like being sure to pay all bills on time, reducing debt levels, avoiding new credit inquiries, and correcting any inaccuracies on your credit reports. By setting up payment reminders, budgeting to pay down existing debts, and regularly reviewing your credit reports for errors, you can gradually improve your credit score, which may lead to better loan terms and interest rates in the future.
|FICO Score Range
7. Get ready for tax time
April will be here before you know it; prepping for tax season early reduces the stress of a last-minute rush and ensures a smooth filing process. Get started now by making a list of all the income documents you expect to receive. Look over your 2023 spending to identify any potential deductions or credits. If you anticipate owing taxes, early preparation gives you time to budget for the payment. Being proactive with your tax planning can also help identify opportunities for tax savings and ensure compliance with tax laws.
Reflect on any charitable donations you made in 2023, as these can potentially be deducted from your taxes if you choose to itemize deductions. It’s important to note that for these contributions to be eligible for tax deductions, they must be made to qualified 501(c)(3) organizations. You may need documentation for each donation when filing your taxes and claiming the deductions, so track down your receipts.
Student loan interest
If you’ve been paying interest on student loans, you might be eligible to deduct this expense on your taxes. To take advantage of this deduction, gather all relevant documentation, such as statements or 1098-E forms from your loan servicer, which detail the amount of interest paid over the year. Unlike many other tax deductions, you don’t have to itemize deductions to claim this deduction.
The interest you pay as part of your mortgage payments may also be tax deductible if you itemize deductions. Your mortgage servicer should furnish you with a 1098 form detailing how much you spent on interest last year. This deduction can reduce your taxable income, potentially leading to significant tax savings.
W2s and 1099s
W2s and 1099s are both tax forms, but they have a few key differences. W2 forms are issued by employers, and detail wages and taxes withheld for employees. 1099 forms, on the other hand, are given to independent contractors or freelancers and report income without tax withholdings. These forms, which you should receive by the end of January, are essential for determining your total income and taxes paid in 2023. If you have both employment and contract income, you’ll want to combine the information from W2s and 1099s to accurately assess your total tax liability. Remember, since taxes aren’t typically withheld from 1099 income, you may need to account for additional taxes owed.
Interest and capital gains earnings
Money you earn from investments is taxable, though different rates may apply for interest, dividends, and capital gains. You should expect to receive forms such as 1099-INT for interest earned from accounts like savings or CDs, and 1099-DIV or 1099-B for capital gains from investments. These forms, typically sent by banks and brokerage firms, detail the amount of taxable interest and capital gains earned in the year. Inspect these documents closely, possibly with your financial advisor, to accurately estimate your tax liability.
8. Revisit your retirement plans
A lot can change in a year, so be sure to reassess whether your retirement plan still aligns with any life changes you’ve experienced or anticipate, such as starting a family, shifts in income, or adjustments in your target retirement age. These changes can significantly impact how much you need to save and the strategies you use to reach your retirement goals.
Reviewing your retirement accounts is a core component of your financial planning checklist. Be sure to check on all of your accounts if you have more than one, including 401(k)s, 403(b)s, and individual retirement accounts (IRAs), across different employers or financial institutions. This will give you a clear understanding of where your money is invested and how each account is performing. You might also consider rolling over old 401(k)s or 403(b)s into an IRA, which can simplify your retirement savings and potentially offer more investment choices.
Now is the ideal time to take a look at your employer-sponsored retirement plans, such as 401(k)s or 403(b)s, to ensure you’re maximizing their benefits. If possible aim to contribute at least enough to receive the full company match, as this is essentially free money that enhances your retirement savings. When deciding how much to contribute, be aware of the contribution limits for 2024, as the caps usually change annually. Contributing as much as you can within these limits not only boosts your retirement fund but also offers tax advantages. If your financial situation allows, consider increasing your contributions in 2024 to further build your retirement savings.
Additional IRA contributions
If you have a traditional or Roth IRA and have not met the contribution limit yet, you can make contributions for the 2023 tax year until April 15, 2024. For the 2023 tax year, the IRA contribution limits are $6,500 for those under the age of 50 and $7,500 for those above. For 2024 contributions, the IRS increased these limits to $7,000 for those under the age of 50 and $8,000 for those above. Unlike traditional IRAs, Roth IRAs have reduced contribution limits based on filing status and income, so do your research to be sure you don’t exceed them. Maxing out your traditional IRA contributions can not only enhance your retirement savings, but may also provide tax benefits if you can deduct your contributions from your taxable income.
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Target timeline and goal
Completing your financial planning checklist involves reflecting on more than just money; how you want to live your life long-term is part and parcel of the process. Reflect on when you’re hoping to retire, whether that’s in the far-flung future or around the corner, and how much money you’ll need to make it happen. Take a look at your current retirement savings and planned contributions, then calculate if you’ll have enough to retire at your target age. You might also want to estimate how much social security income you’ll receive. This is where financial planning and life planning come together. Are you on track to have the funds to retire at your desired age? If not, you’ll need to either increase your retirement savings or extend the time you’ll remain in the workforce. Doing this exercise annually is an important part of maintaining a realistic financial plan, as your target retirement timeline and savings goals can change due to shifts in your career, family circumstances, and many other factors.
9. Consider family and estate planning
Changes in your family and estate throughout the year can affect your financial needs and goals. Whether it’s the arrival of new family members, a marriage or divorce, or adjustments in your long-term plans, each of these factors can influence your financial strategy. Annual reviews help to align your financial planning with your current life situation and future aspirations.
Family size and dependents
Consider any changes in your family’s size and your dependents. Your family may be growing, whether you’re welcoming a new child, planning for one, or anticipating the need to support relatives. Or perhaps your household has gotten smaller due to a change in marital status or children moving out. These changes can significantly impact your personal finances and tax filing status, so they necessitate shifts in both your day-to-day budget and long-term financial goals.
Education costs for children
Now is an opportune moment to think about whether you want to start saving for your children’s future education costs, whether you already have kids or are planning to have them, or if you want to support young relatives with their college costs. Even with the help of financial aid, tuition costs can be a big burden. Investment vehicles like 529 plans or Coverdell Education Savings Accounts offer tax advantages and are specifically designed for education savings. These accounts allow your contributions to grow tax-free, provided the funds are used for qualified educational expenses. Starting early on these savings can greatly ease the financial burden of higher education in the future.
This is a heavy but important part of personal finance planning: do you know who will receive insurance benefits in the case of your death? If you haven’t checked your policy in a while, or if you haven’t paid attention to the policy offered by your employer, now’s the time to check. Be sure to review your life insurance as well as any other policies that come with survivor benefits, such as annuities or pensions. Keeping this information up to date ensures that your insurance benefits will be directed according to your current wishes and provides peace of mind that your loved ones will be taken care of.
Estate planning may sound like a grandiose endeavor for wealthy people, but it’s actually a valuable part of anyone’s financial planning checklist. Regardless of your age or net worth, making a plan for your estate ensures that your loved ones are informed and prepared to handle your assets in the event of your passing. This involves documenting all pertinent information about your assets, including bank and investment accounts, insurance policies, real estate holdings, as well as any debts like a mortgage, loans, and credit cards. It may be helpful to work with a financial planner to organize this information and store it in a single, accessible location. This can significantly ease the process for your family or executors. Additionally, consider legal instruments like an advance medical directive or a durable power of attorney. Bonus: having this information in one place also comes in handy when you update your financial plan in the future.
10. Set financial goals
The whole point of your financial planning checklist is to help you attain the things you really want in life. As you look ahead to next year and beyond, define your financial goals and strategize how to save for them. Revisit goals you’ve set in the past and make adjustments as needed. A career shift, a change in family dynamics, or evolving personal ambitions can all influence your financial priorities, so update or set new goals that reflect what matters most to you now. This is your chance to dream big and make a plan to turn those aspirations into reality.
Short-term financial goals
Short-term financial goals are objectives you aim to reach within a relatively brief period, typically about a year. You might want to save up for a vacation, a major purchase like a new appliance, or a big event like a wedding. Consider setting up a sinking fund in a dedicated savings account to stash money so you don’t accidentally spend it. In addition to tangible savings targets, consider setting short-term goals for financial health habits too, like sticking to a budget, reducing impulse spending, or implementing money-saving tips.
Mid-term financial goals
Mid-term financial goals typically take up to five years to achieve. These might include saving for a down payment on a home, funding a big home renovation, or accumulating capital to start a small business. For these types of goals, you might want to put your savings to work earning returns with low-risk investments. For example, you might put some money into an FDIC-insured high-yield savings account or certificate of deposit, and invest some of your funds in Treasury bills or notes.
Long-term financial goals
Long-term financial goals are those you aim to achieve more than five years into the future. These often include saving for retirement, funding your children’s college education, or paying off a mortgage. Achieving these goals usually requires a combination of disciplined saving and strategic investing. For instance, contributing regularly to a retirement account and investing in a diversified portfolio can help build wealth over time and outpace inflation. Consider working with a financial advisor to help you clarify and align your current strategy with your future goals; the more specific you can make your goals, the easier it can be to stick to your saving and investing strategy over the long haul.
11. Prepare your 2024 budget
With the comprehensive components of your personal finances you’ve gathered in the previous steps of your financial checklist, you’re well-equipped to lay out a detailed budget for 2024. Whether you’re new to budgeting or have it down pat, you might want to explore different budgeting methods, like the 50/30/20 rule, envelope budgeting, or a zero-based budget. Whichever approach you take, you’ll need to determine your take-home income, plan out your expenses, and incorporate your saving and investing plans.
Start by getting a handle on how much money you’ll have to live on each month. This includes not only your regular salary or wages after taxes and other deductions, but also any additional sources of income you might have. These could be earnings from part-time work or freelance projects, rental income, spousal or child support, benefits from government programs, or dividend payments from stocks. If you anticipate any windfalls, like a tax return, bonus, or large financial gift, incorporate this into your budget too; you might want to use it to fund a financial goal or knock out some debt.
Next, categorize your expected expenses based on your spending patterns from 2023 and any anticipated changes for the upcoming year. Break your expenses into fixed, variable, and infrequent categories. Fixed expenses include regular payments such as rent or mortgage, utilities, insurance premiums, and loan repayments. Variable expenses, which can fluctuate, might consist of groceries, entertainment, dining out, and gas. Don’t forget to account for infrequent expenses, like annual subscriptions, car maintenance, or holiday spending, which can upend your budget if not planned for.
Savings and investing
Integrating regular saving and investing into your monthly budget is key to achieving the financial goals you’ve identified. You might start by determining a specific percentage or amount of your monthly income to allocate towards savings and investments. This could be guided by goals such as building an emergency fund, saving for a down payment, or contributing to a retirement account. For savings, consider setting up automatic transfers to a dedicated savings account right after you receive your paycheck. For investing, consider making regular contributions to a diversified investment portfolio or retirement accounts; you may be able to automate those contributions too.
The best budget is one you can stick to. That calls for flexibility to accommodate life’s inevitable curveballs and ongoing tracking to adjust as needed. Set yourself up with the tools you need to stay on top of your budget, whether that’s a budgeting app to track your spending, automated budgeting tools in your online bank account, or just a good old-fashioned spreadsheet. And put a recurring appointment on your calendar to balance your budget every week or two. Your financial checklist is about setting yourself up for big-picture success, but ongoing attention to your personal finances is what will keep you on track with your plans.
Your financial planning checklist: an empowering start to the new year
It can feel refreshing, and even exciting, to kick off the new year with a solid plan for your personal finances. From managing debt and spending to optimizing your saving and investment strategies, each step is an opportunity to enhance your financial well-being and enjoy the feeling of confidence that comes with managing your money. Completing your financial checklist empowers you with the insights you need to navigate both the coming year and your long-term financial journey. And if investing is part of your 2024 financial plan, Stash makes it easy to get started, helping you achieve your financial goals and paving the path to a better future.
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