Annual Financial Hygiene Checklist

This blog post was originally published by Lorri DeFoor at Sustain Financial, Inc.

Financial planning can be a lot of things… fun, stressful, exciting, overwhelming. But in reality, a lot of the time, like many types of self-care, it can actually just be boring. So, while this can be an exciting time of year to think about aspirations, it’s also a good time of year to think about one of the most important and boring parts of your financial equation: basic maintenance.

That’s why, this year, in celebration of the new year, we’re putting out an annual financial hygiene checklist. Whether you’ve got big financial resolutions for the new year or plan to just stay the course, there are a few things we should all make sure to do at least once a year to ensure basic, ongoing financial health.

Item 1: Log In to Your Accounts

That means bank accounts, investments, and credit accounts. I know, it’s hard to imagine you could lose track of your money, but we’ve helped more than one client track down accounts they have lost over time. That’s why it’s a good idea to make sure you know where your accounts are located, and to log into each of them at least once per year.

While you’re logged in, we recommend:

  • Changing your passwords – a task that should be done at least annually.
  • Updating your directions or guide for your Power of Attorney and Estate Executor. (Don’t have a guide set up? Check out Erik Dewey’s Big Book of Everything for a great place to start.)
  • Getting the information you need for an updated balance sheet and net worth statement.

Item 2: Update Your Balance Sheet and Net Worth Statement

In a nutshell, your balance sheet is a list of what you own and what you owe, and your net worth statement is simply a calculation of the value of everything that you own minus everything that you owe.

Sounds pretty boring, right? But, we firmly believe that the only appropriate way to assess your financial progress and status is to use your past self (rather than anyone else or any random societal standard) as a benchmark, and the easiest way to do this is to build a net worth statement and update it at least once per year.

Not sure where to start? Check out Gabbi’s incredibly helpful video on this topic.

Item 3: Check the balance of your Flexible Spending Account (FSA)

This one is a bit time sensitive. Many employers allow an FSA grace period where funds contributed last year can be spent this year as long as they are spent before March 15th. So, if you didn’t check the balance of your FSA and spend it down at the end of last year, there may still be time before the “use it or lose it” deadline.

Item 4: Revisit your Roth and Traditional IRA Contributions

You have until the tax filing deadline to max out your personal Traditional IRA or Roth IRA for the previous year, so if you’d like to make a contribution for last year, there’s still time.

That being said, it’s also important to remember that IRAs and Roth IRA’s have income limits and rules to abide by. So, to make sure you’re staying on the right side of the IRS when it comes to if and how much you contribute, it’s good to revisit those rules and income limits annually.

To stay out of a situation where you may have to do a complex reversal or recharacterization, it’s a great idea to work with your tax professional and/or financial advisor to best determine if and how you can take advantage of traditional or Roth IRA contributions each year.

Item 5: Establish or Re-Establish a Fraud Alert on your Credit if it’s not Frozen

If you’re not in a place where it makes sense to freeze your credit entirely, the bare minimum recommendation to protect your credit is to set a fraud alert on it annually. This will make sure no one can open a line of credit in your name without you receiving a phone call first.

And, it’s super easy to set up. For step-by-step instructions, check out this blog post we published on the topic a few months ago.

Item 6: Check Your Social Security Earnings Record

If you haven’t heard my cautionary tale of how it’s not just a given that your employer accurately reports your W2 earnings to the Social Security Administration each year, you can read about it here.

But, the moral of the story is, it’s a really good idea to regularly review the earnings the Social Security Administration receives for you each year from your employer, because mistakes get hard to fix the longer they go unnoticed. And, it’s much easier to check your approximate earnings and spot a mistake when it’s only 2-3 years old, rather than having to rely on your memory to notice a mistake from 10 or 20 years ago.

Item 7: Review Your Insurance Policies

We hope you have a good insurance agent or broker (or at least a good financial planner) that you’re working with to review your insurance coverage regularly, but we also know that insurance is kind of boring, and even though your agent calls you every year, you may not always respond. Coverage needs for life, disability, renter’s, homeowner’s, auto, and umbrella liability insurance all change throughout the course of your lifetime, so you can’t just set them and forget them. It’s a good idea to sit down and review your coverage annually and make sure it’s adequately protecting you and your family.

Item 8: Check Your Tax Withholding

Did you know the IRS provides a free calculator that will allow you to check your tax withholding at any point during the year to see if you can expect a refund (or will owe money)? Checking this 2-3 months into the year can give you plenty of time to make adjustments to withholding so that you don’t end up with a big, unexpected tax bill next year.

It’s also a good idea to revisit this if you receive a major change in pay or take on a new or additional job in the middle of the year.

Even if you don’t have major financial aspirations or goals for 2024, think of this list like an oil change for your car – you may not need a new car or a new transmission, but there’s some basic maintenance that we all need to do to keep our financial picture looking healthy on a regular basis, and this list is a good place to start.

 

 

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