Ask an ally: Am I missing these important year-end financial steps?
As you start planning for next year, it may be time to review your finances. But it’s not just about numbers — it can also be a good idea to reflect on the behaviors and actions you took that led you toward or away from your financial goals. Taking stock of your money habits and underlying emotions is just as important as reviewing your finances. We spoke with Ally Invest Senior Financial Advisor Dimitri Pan for insights that may help you in reviewing your financial status and behaviors before the new year.
Check in with goals, finances and behaviors
To get started with your own financial check-in, begin with these three steps.
1. Think about your values and goals
When it comes to your finances, keeping your personal values and your life goals front and center will help you stay focused. To assess whether your aspirations have changed, ask yourself a few questions:
What life changes came your way this year?
Do you anticipate any big changes on the horizon?
What goals did you set for this year, if any?
What is the current status of those goals?
What do you want to accomplish in the year ahead?
Look at how these answers work together and see whether there are conflicts. If you’re planning to buy a house but your savings goals aren’t where you’d hoped they would be, for instance, now might be the time to buckle down and develop some saving habits.
2. Look at your current financial situation
Record your current income, outflow and other financial details in a secure record to reference later. Be as comprehensive as possible, especially with spending. Approximating your expenses can hinder your ability to accurately understand how much money you have available to apply to your other goals.
Approximating your expenses can hinder your ability to accurately understand how much money you have available to apply to your other goals.
3. Reflect on your behaviors
Many of our financial habits are deeply ingrained in our histories. Often, to change a behavior, you may need to address it head-on — and understand what from your past is driving it. Taking spending as an example, reflect on questions such as:
How was your spending over the last year?
Do you feel comfortable with your expenses?
Was your spending in alignment with your values?
Overall, consider which behaviors you want to start, continue or end in the new year. Making this list can help remind you of your goals and realign any financial behaviors that may be inhibiting your progress. And if you need a little extra structure, try a budgeting template or follow a financial checklist.
Resolve to re-assess
Quarterly assessments on your own time can be helpful to maintain awareness of your progress, so consider scheduling those out for yourself. As financial advisors, we like to do annual comprehensive check-ins with our clients, as well as discuss new life events (such as a new baby, promotion, divorce or loss) as they come up through the year. We also encourage people to do their own check-ins between meetings.
Throughout the year, a few different approaches can help you stay on track:
Embrace teamwork with others. If you have a family member or partner you share finances with, talk about your goals to reach agreement and work together to pursue them.
Set up automations to help you stay consistent. Refine your use of Ally Bank's tools like
buckets and boosters or use direct deposit to split your funds between checking and savings.
Consider trade-offs you can take if certain situations arise, like if you miss your three-month goal and need to cut back in one area to meet it. Or, if you choose to prioritize one goal, another may need to take a back seat.
Other end-of-year considerations
Once you’ve addressed your own habits and goals, here are a few tactical items to consider for your check-in list.
Assess your IRA contributions
Take advantage of employee benefits (such as wellness programs) before the end of the year
Rebalance your investment portfolio, if needed
Review your tax information
If you received a promotion or raise and have a 401(k) through your employer, re-assess your contributions
Check if any of your retirement accounts have Required Minimum Distributions (RMDs) after a certain age
Your year, your goals
Avoid holding yourself to vague expectations (such as “spending less”) or defining any behaviors as inherently “good” or “bad.” Your goals should be personalized for your situation, not others' expectations. And remember, your goals don’t need to be based on external measures of “success.” Try to think about vacations and other methods of reducing your stress levels as important goals to accomplish, too.
