Chris Kanze is an entrepreneur and finance consultant to several publications. In the following article, Chris Kanze provides year-end financial guidance for tackling debt, managing insurance expenses, revamping charitable donations, and improving credit scores.
Getting finances in order is one of the best ways to ensure that this will indeed be a happy new year.
Financial health should always be a priority, but the new year is a great time to check one’s financial pulse. According to a survey from the Financial Health Network, the financial health of Americans has declined for the first time since 2018.
In 2021, 31% of people were considered financially healthy, a designation that considers such factors as responsible spending, short-term and long-term savings, debt, and more.
Chris Kanze provides below some of the main items that should be on every end-of-the-year financial health checklist.
Chris Kanze Says to Review a Financial Plan and Goals
Chris Kanze says that a budget is a must-have for any successful money management plan, but a lot can change over the year.
Before the new year rolls in, take a hard look at an existing budget and see how it fared across the year. There may be some adjustments to make due to an increase in income or a major expenditure to compensate for, such as a new home or a vacation.
Review any financial goals as well and see if they were met during the past year or if there’s still a way to go. It’s also a good time to think about how to finally reach certain goals this year and which new financial goals can realistically be integrated into a budget.
Consider Donating to Charity
Charitable giving is at the top of many people’s to-do lists by the end of the year reports Chris Kanze. That giving spirit Is hard to ignore and making donations by the end of the year also qualifies donors for deductions on next year’s tax return, lowering the overall bill.
Something to keep in mind: If a donation is dated before Dec. 31 it counts toward a tax deduction even if the money is technically cashed or received in the new year.
Don’t Neglect Savings
In an uncertain economy fueled by inflation and fears of recession, savings is usually one of the first elements of a financial plan to be set aside.
According to Bankrate, 58% of U.S. adults say they are concerned about what they have in emergency savings and 49% say they are saving less because of inflation.
Before the new year, Chris Kanze says to take a look at the state of both regular and emergency savings and see where there may be some room for improvement in the coming year. A little bit of savings each month is better than none at all.
There are approaches to rebuilding emergency savings that can fit any budget. Speaking of savings, the end of the year is also the best time to take a look at other savings, such as the amounts in a 401(k) plan or a Roth IRA and see if strategies should be adjusted for those as well.
As with savings, debt is difficult to manage during economic uncertainty reports Chris Kanze. At the end of the year take a look at all of the remaining debt, break it down into categories, and itemize them. Make a priority list for tackling this debt in the coming year.
Chris Kanze says that this may mean coming up with a plan to tackle the biggest debt with the largest interest rate first and go down from there or start by paying off the lowest debt amount and working upwards.
Additionally, Chris Kanze says that debt often provides a window into negative spending habits. The end of the year is a great time to base a new spending approach on habits that will not incur further debt.
Review Insurance Holdings
A beginning-of-the-year evaluation of insurance holdings is essential to determine if one is adequately insured throughout the year.
Chris Kanze says that this includes checking a life insurance policy, determining if the liability coverage is still the right amount to protect loved ones, and if extra coverage is needed for an auto policy.
Don’t Forget the Credit Score
Have credit that’s less than ideal? If it’s a score below 700, make this year the one to improve, whether it’s through always paying bills promptly, lowering debt, or making spending cuts.
One of the best ways to start the year off right financially is a better credit score to begin improving one’s financial health for the long term.