Your 2023 Year-End Financial Checklist

The past year has brought a lot of change financially, from inflation to higher interest rates, so there are a lot of things to consider when it comes to your finances. While it may feel overwhelming, the reality is that taking some simple steps as we approach the end of the year can help ensure that you’re well positioned financially for whatever happens next.

2023 year-end checklist

Manage risks

No one can predict the unexpected, but that doesn’t mean you can’t be ready for when it arrives. Preparing for life’s uncertainties is vital to your financial health, because doing so can help you navigate life’s occasional choppy waters without throwing your financial plan overboard.

Top off your emergency fund: As the year winds down, it is a good time to refill your if you’ve tapped into it during the past year, or if you don’t have one, start one. Aim to set aside three to six months’ worth of expenses in an account that you can access to cover unexpected bills. Having these funds at the ready can help you cover surprise expenses, such as car repairs or medical expenses, without relying on high-interest credit cards or dipping into long-term savings.

Review your insurance policies: How did your life change during the past year? Did you start a new job or get that big promotion and now have a higher paycheck? Maybe you got married? Did you have a child? Life’s big moments can mean you have more to protect. Depending on your situation, you may want to consider upping your life or disability insurance coverage or updating beneficiaries on existing policies. Along the same line: If rising costs over the past year mean your home appreciated in value, you may need more protection.

Time for a health care checkup: November through December is typically open enrollment season for health coverage. Make sure you review the coverage in your health plan. If you have a health savings account (HSA), you may want to top off annual contributions ($3,850 for an individual and $7,750 for families) to maximize the triple tax advantages—money goes in tax-free, grows tax-free, and comes out tax-free for qualified health care expenses. If you’re at least 55 years old, you can also contribute an extra $1,000 to your HSA. If you have a flexible spending account (FSA), consider spending the funds that won’t carry over to next year, as you may lose them.

Check in on your investments

Investing for growth is a key part of building a nest egg for big costs in the future like retirement. Although you may not plan to retire for many years, there are a few things to consider at least annually.

Rebalance your portfolio: Depending on what happened in markets through the year, your portfolio’s asset allocation (the mix of stocks, bonds and other investments) may no longer reflect a level of risk that fits with your goals and investment horizon. You may need to rebalance your portfolio to bring your investment holdings back in line with your risk tolerance and goals.

Recognize capital gains or losses: Selling investments at a loss hurts but can also reduce your taxable income for the year. It’s called tax-loss harvesting. Depending on your situation, you may also want to sell investments that have appreciated and realize gains. It’s a good idea to work with a financial planner or tax attorney to think strategically about when it makes the most sense to recognize capital gains or losses.

Top off retirement contributions: If your financial situation allows, it may be a good idea to up your contributions to your retirement account. This can be a good yearly practice until you’re contributing the maximum amount allowable to an IRA, 401(k), 403(b) or their Roth counterparts if those are available to you. The tax advantages these accounts offer can help your money go further over time.

Revisit your budget

A little planning can help you get the most out of your budget. The end of the year is a great time to reflect on your spending plan and adjust it for next year.

Update or establish your budget: Review your spending this past year and update how you plan to allocate your money for 2024 and beyond. Tracking your spending is a great way to see where your money is going and can help you prioritize those things that are most important to you.

Review rates on outstanding debt: With interest rates rising, it is a good time review current interest levels of your outstanding loans (such as mortgages, personal loans and credit cards) to determine if there are opportunities available to roll over balances to save on interest costs going forward.

Prep for big events: No one can predict the future, but we can plan for big events, such as weddings, surgeries, vacations, or buying a car or home. If you’re planning a big-ticket expense in the coming years, add that into your budget and start setting aside money.

Check your credit: Many consumer finance companies provide free, real-time credit scores. If you have access, check your score and make sure it’s where you want it to be (typically 740 and higher is considered very good). Also, request a copy of your credit report. The Fair Credit Reporting Act requires credit reporting companies to provide a free copy once every 12 months. While we’re on credit: If you’ve accumulated credit card reward points, use them before they expire!

Lean on a financial advisor

This isn’t necessarily an exhaustive list given everyone’s financial situation is different. However, it’s a good jumping-off point. And it’s important to point out that while these are all items on a checklist, they all work together. That’s where a Northwestern Mutual financial advisor can help you, by building a plan that uses a range of financial options that reinforce each other. If you already have a financial plan, it’s good to check in on it yearly. If you don’t have a plan yet, get one! Your plan can help put you on the best path to achieving whatever is important to you in life.

All investments carry some level of risk, including the potential loss of principal invested. Diversification and strategic asset allocation do not assure profit or protect against loss.

This article is not intended as legal or tax advice. Northwestern Mutual and its financial representatives do not give legal or tax advice. Taxpayers should seek advice regarding their particular circumstances from an independent legal, accounting or tax adviser.