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New Year Financial Checklist

Use a New Year Financial Checklist to Change Your Money

Who doesn’t want to head into the new year in a better financial position?  There’s no magic wand to wave over your money, but this new year’s financial checklist is the perfect plan for making changes. 

1. Make a spending plan

The very first step of your new year financial checklist is to create a spending plan. It might even be the most important step. 

Some people call it a budget, but a spending plan sounds nicer. No matter the name, having a plan for your spending will help you take control of your finances

A spending plan helps you:

  • Spend less than you earn
  • Pay bills on time
  • Monitor spending
  • Be intentional with your money

A budget doesn’t control you, it lets you control your money. There are different methods for creating your spending plan, so you can find the one that works best for your life & personality. 

How to make a spending plan

To start, track your spending for the last 3 months. The easiest way is to do that is through a budgeting website/app (like Mint or YNAB) so you can import transactions from your bank and credit card accounts. 

Next, just categorize the spending as best you can, so you can move forward. Don’t get hung up on splitting your Target purchases into groceries vs. home supplies vs. pet food. 

Base your first budget on what you’ve spent previously. Over time, you should slowly change your budget, to reduce spending in certain categories and get to a point where you spend less than your earn. Eventually, you can carve out extra money for savings, investing, or extra debt payments. 

Hold budget meetings

Your spending plan is a living document. It will change each month, as you get used to budgeting, understand your spending better, and get better at sticking to the plan. Your activities, events, and spending will change each month, so your plan should too. 

The best way to make your spending plan part of your life is to hold budget meetings, at least monthly. If you’re struggling with your spending, weekly meetings are a great idea. 

Use these check-ins to discuss budget changes, upcoming expenses, and how this whole thing makes you feel with your significant other or accountability partner. Following a spending plan doesn’t have to be hard or scary; it just requires some work. 

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    2. Review your credit report

    You can request a free credit report at Annual Credit Report. Actually, this is one step of the new year financial checklist you should do at least 3 times a year. 

    Under normal circumstances, you can get a free report from each of the three reporting bureaus each year. If you spread those out, you can get a report every 4 months, so you always have access to fairly updated information.

    As of December 2021, you can get free reports even more often. Each bureau is offering a weekly credit report, thanks to the pandemic. You don’t need to pull your report THAT often, but it’s nice to be able to get an updated report basically whenever you want. 

    What to look for on your credit report

    When reviewing your credit report, you should first make sure that every debt reported is accurate. Do you actually owe that amount? Have you paid off the debt, had it discharged in bankruptcy, or written off?

    Pay extra attention to any accounts listed as “collections.” That means that the original lender has given up on collecting payments & sold the account to a collection agency. Any account in collections has a big negative impact on your credit score.

    Your credit report will also list the lender, so you have a starting point to contact the lender if you want to attempt negotiations. It’s not easy to work out a reduced payment, but it has happened. 

    If you find something incorrect, you can write to the reporting bureau and dispute the error. Resolving errors is important to maintaining or improving your credit score. A good credit score helps you get better interest rates, can be required for certain jobs and may be needed for new utilities. 

    3. Make a debt payoff plan

    The free Debt Payoff Planner is the perfect way to start your debt freedom journey.

    A debt payoff plan is a straightforward method for listing all your debts and deciding the order to pay them off. It also helps you calculate how much extra you can pay on each debt as you work down the list. 

    Attacking your debt with focus keeps you on track, using your money more efficiently.  Spreading extra payments across many debts will slow down your progress, but focusing on one debt speeds up the process.

    make a plan that works for you

    Paying off debt is a mind game more than a math problem. It makes sense, from a math standpoint, to pay off your highest interest rate loans first. However, paying off the smallest balance loan gives you such a mental boost that the interest expense is worth it.

    Often, the difference in total interest paid is pretty minimal (unless you have a large balance at a really high rate). You’ve got to keep your head in the game long-term, so do what it takes to feel hopeful and motivated. 

    You’ll use the information from your credit report to make a list of all your debts (plus others that aren’t reported by a credit bureau). Decide upon an order to pay your debts off, based on interest rates, total balance, or a combination of both. 

    Make minimum payments on everything, except your focus debt – the debt you’re working to pay off first. Once that debt is gone, roll the payment amount into monthly payments on the next focus debt. By the time you get to your last debt, you’ll be making pretty large monthly payments.

    4. Get life insurance

    This box on the new year financial checklist is the most important to check off so you can protect your loved ones. 

    You need life insurance if you have minor children, provide financially for others, or have debt that would become a burden on loved ones. 

    You can get an affordable policy from your employer if that’s a benefit they offer. Private policies are more expensive, but they can follow you from job to job. 

    how much life insurance do you need?

    It’s also important to have enough life insurance. A small policy helps, and anything is better than nothing. You should try to have a large enough death benefit to cover all outstanding debt, pay for your kids’ college expenses, and give your remaining family time to grieve. 

    A super simple way to calculate your insurance needs is to multiply your annual income by 10. While it’s not the most accurate measure of your need, it’s quick & easy. 

    If you have the bandwidth, you can find a more accurate number to fit your situation better, like the DIME method. Just add up (non-mortgage) Debt + Income (multiplied by years until your youngest child graduates high school) + Mortgage balance + Education costs for your kids.  

    Don’t let complex calculations hold you back from buying a policy. 

    It’s more important to take action now, while you’re thinking about it. You can always increase your payout or purchase additional policies later – just remember that premiums are cheaper when you’re younger and/or healthier. 

    5. Invest in retirement

    Investing in retirement is the segment of the new year financial checklist that protects you in your old age. No one wants to work forever, and retirement investment is the way to avoid that fate. 

    The simplest way to start saving for retirement is to enroll in your employer’s plan if that’s an option. If you leave the job, you can roll that account over to a personal account, unlike employer-provided life insurance. 

    If you don’t have access to an employer-sponsored retirement account, there are still options for you, like an IRA. Retirement accounts have tax advantages too, but the type of account matters much less than starting to invest now. 

    Compounding interest needs time to work its magic, so investing earlier is much more important than how you invest. 

    Or increase your contributions

    Maybe you already have a retirement account; if so, consider increasing your contributions. The recommendation is to invest 15% of your pre-tax income. If you can work that into your budget, you should absolutely invest that much. 

    Increasing your contributions by 1% per year is an almost-painless way to get to that goal. You probably won’t even notice that your take-home pay is less after each increase. The impact on your ending retirement balance will be significant, however. 

    Download the
    New Year Financial Checklist

    — the free download that will change your money this year —

      We won’t send you spam. Unsubscribe at any time.

      6. Get your tax documents together

      Personal income taxes have to be submitted by April 15 each year, unless an extension is filed (but taxes due need to be paid in April regardless). Use the new year financial checklist to kick-start your tax-filing process. 

      Taxes don’t have to be a huge hassle, especially if you have your paperwork under control. Put important tax documents in a folder throughout the year, so they’re ready in the spring. 

      You might need…

      • Last year’s tax return
      • W-2 for employee wages
      • 1099-G for unemployment income 
      • 1099s from investments
      • SSA-1099 for Social Security income
      • 1098 for mortgage interest paid
      • Property taxes paid
      • 1098-E for student loan interest paid
      • 1098-T for tuition paid & scholarships received
      • State & federal refunds received
      • Business-related income & expenses
      • Retirement contribution information 
      • Receipts for:
        • Childcare expenses
        • Medical/dental expenses
        • Charitable contributions
        • Energy-efficient home improvements 
        • Classroom supplies if you’re a teacher

      Obviously, the specific documents you need will depend on your tax situation, but this is a general outline to get you started. 

      If your taxes are more complex than a home, tuition, and children, I recommend having your return prepared by a licensed Certified Public Accountant. A professional should reduce the number of errors, and provide support if there are errors discovered down the road. 

      Why is the new year financial checklist so important?

      Most New Year’s resolutions don’t actually happen. Saying “I’m going to be better with money” is SO much harder than following a new year financial checklist because it’s not a clear goal. 

      Instead of making resolutions, I like to choose a word of the year to live by. Living with intention every day has a different, more relaxed vibe than pursuing a specific goal. 

      These 6 tasks will make a big impact on your money, and help you actually accomplish your goal of being better with money.  

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