Your Annual Financial Planning Checklist

If you’ve taken on the task of mapping out your annual financial plan, you deserve a pat on the back. Ensuring that you’ve covered all of the bases is important to both your short- and long-term financial health.

Keeping track of your progress with an annual financial planning checklist makes it easier to see which tasks have been completed and which ones you still need to tackle.  

Annual Financial Planning Checklist

Now that you know what an annual financial plan is and how to make one, let’s recap the most important steps in the process. Check off each step that you've considered, even if your response was, "No, I don't want to refinance my mortgage" Or, "My credit cards are already paid off!" The idea is to make sure you've looked at the issue. But you do need to cover every item in our first section so that you have a full financial inventory.

Create your personal financial inventory

Your personal financial inventory is important because it gives you a snapshot of how healthy your bottom line is. (For more, check out The Importance of Making an Annual Financial Plan.) This annual self-check should include:

 ☐ A list of assets, including items like your emergency fund, retirement accounts, other investment and savings accounts, real estate equity, education savings, etc. Any valuable jewelry, such as an engagement ring, belongs here, too.

 ☐ A list of debts, including your mortgage, student loans, credit cards and other loans

 ☐ A calculation of your credit utilization ratio, which is the amount of debt you have versus your total credit limit

 ☐ Your credit report and score

 ☐ A review of the fees you’re paying to a financial advisor, if any, and the services he or she provides

Set financial goals

Once you have a personal financial inventory completed (see the video Why Create a Financial Inventory? for key insights), you can move on to setting goals for the year ahead. Your goals will be short-term, mid-term and long-term.

Among your short-term goals might be to:

 ☐ Establish a budget.

 ☐ Create an emergency fund or increase your emergency fund savings.

 ☐ Pay off credit cards.

Your mid-term goals might include:

 ☐ Get life insurance and disability-income insurance.

 ☐ Think about your dreams, such as buying a first home or vacation home, renovating, moving – or saving so that you'll have money to have a family or to send children or grandchildren to college.

Then review your long-term goals, including:

 ☐ Determine how much of a nest egg you’ll need to save for a comfortable retirement.

 ☐ Figure out how to increase your retirement savings.

 ✔ Focus on the family

If you’re married, there are certain things that you and your spouse should be thinking about on the financial front. These are some of the items that may be on your punch list:

 ☐ If you have children, determine how much you’ll need to save for future college expenses.

 ☐ Choose the right college savings account (read also: Using 529 Plans to Save for College).

 ☐ If you are caring for elderly parents, investigate whether long-term care insurance or life insurance can help.

 ☐ Purchase life insurance for yourself and your spouse.

 ☐ Start to plan how you and your spouse will time your retirement, including your Social Security claiming strategy.

Review your retirement savings plans

Saving for retirement in an individual retirement account (IRA) or 401(k) is a smart way to enjoy some tax advantages. As you put together your annual financial plan, you should consider whether you need to:

 ☐ Decide whether a Roth or Traditional IRA is best for you now.

 ☐ Consider switching an existing IRA to a different brokerage.

 ☐ Convert a traditional IRA to a Roth IRA.

 ☐ Do the same for your 401(k), which can also be Roth or regular. (For more, see 401(k) Plans: Roth or Regular?).

 ☐ Roll over any old 401(k) accounts from a previous employer.

 ☐ Increase or decrease your annual contribution amounts to retirement accounts.

Review your investments

It’s important for investors to take stock of where their investments are during the annual financial planning process. This is especially true when the economy undergoes a shift, as is happening now.

 ☐ Check your asset allocation. If stocks are taking a dive, for example, you may consider adding real estate investments into your portfolio mix to offset some of the volatility.

 ☐ Then figure out which investments will do the best job of meeting your asset allocation goals – and whether your current investments still fit that profile.

Rebalance your portfolio

Periodically rebalancing your portfolio ensures that you’re not carrying too much risk or wasting your investment dollars on securities that aren’t generating a decent rate of return. It also makes sure that your current portfolio reflects your investment strategy (changes in the market often cause a shift that needs to be corrected to maintain the diversification you originally planned)

 ☐ Look at which asset classes you have in your portfolio and where the gaps are. If necessary, refocus your investments to even things out.

☐ Consider the costs of managing your portfolio and decide whether it’s time to try a robo-advisor or other strategy to cut them.

Tackle end-of-year tax planning for investments

While you’re looking over your portfolio and rebalancing, don’t forget to factor in how selling off assets may affect your tax liability. If you’re selling investments at a profit, you’ll be responsible for paying short- or long-term capital gains tax, depending on how long you held the assets. Consider these strategies:

 ☐ Harvest tax losses by replacing losing investments with different ones to offset a potentially higher tax bill (see: 3 Tips to Get Started on Tax-Loss Harvesting and Tax-Loss Harvesting: Reduce Investment Losses).

 ☐ Look into whether you should offset capital gains and losses.

 ☐ Investigate whether it makes sense to use appreciated securities to make charitable donations or support lower-income family members.

Update your financial emergency plan

A sizable emergency fund is helpful if you run into a financial rainy day; be sure you have socked away adequate resources. While you’re at it, look at your broader emergency plan as a whole.

 ☐ If you don’t have three to six months’ worth of expenses tucked away, building your emergency savings should be a top priority. 

 ☐ Invest in insurance: Are you covered for a temporary disability, for example?

 ☐ Make sure you have a financial and medical power of attorney in place.

These are things you should be thinking about as you finalize your annual financial plan.

Look ahead to next year’s savings

As you move towards a new year, think about where else you could be saving money to fully fund your emergency savings and put aside more for the future. Consider whether you should:

 ☐ Refinance your mortgage.

 ☐ Rethink your car insurance.

☐ Lower your food bill.

☐ Utilize Flex Spending or Health Savings Accounts.

☐ Cut the cable TV cord.

☐ Curb your energy bill.

☐ Divert your paycheck to savings, by contributing more to retirement accounts or funneling money directly from your paycheck to an emergency savings account.

Work on building alternative income streams for retirement

A 401(k), pension plan or Social Security benefits may all be potential sources of income in retirement, but they’re not your only options. Figure out what else you could build in.

 ☐ Investing in a rental property and becoming a landlord can provide regular income.

 ☐ Real estate crowdfunding offers some interesting possibilities for investors who don’t want to own property outright (see Real Estate and Crowdfunding: A New Path for Investors)

☐ A part-time job may be the right solution to adding to your income.

☐ If funds are tight and you own your home, investigate whether a reverse mortgage is a good solution for you. 

 ☐ Think about purchasing dividend stocks, starting a side hustle, creating a website that you can monetize or making investments in peer-to-peer lending. These options require varying degrees of time and money to get started, but they all provide avenues for boosting income in retirement.

Start using or update your financial planning apps

Using financial planning apps to track your expenses and income can simplify your financial life, but not all programs are created equal. As you wrap up your annual financial plan, review the financial planning apps or software you’re using to see if it still fits your needs.

 ☐ If you’re not putting any apps to work yet, take the time to review the options and how they can help you manage your money. (Check out 5 Best Personal Finance Planning Apps)

The Bottom Line

An annual financial plan is an exceptionally valuable tool for your life (and peace of mind) today and for your future. Best-case scenario: You've checked off all the items on this punch list by now. If not, don’t hesitate to pencil in time on your calendar to do so before the year is out. You still have a few days left!