Year End Financial Planning Checklist

As the year draws to a close, it’s the perfect time to reflect on your financial standing. Assessing your financial situation helps you understand how well you’ve progressed towards your goals and if adjustments are needed for the upcoming year. That’s why a year-end financial planning checklist is essential. In this article, we’ve covered the essential steps you should include on your year-end financial planning checklist to assess the bygone year and prepare for the upcoming one. 

• Ramp up investments and review your portfolio at the end of each year.
• Undertake tax planning and devise comprehensive debt repayment plans.
• Review and update your insurance coverage before stepping into the new year.

• Review your portfolio
  Reviewing your investment portfolio periodically is a sound investment practice. Including this in your year-end financial planning checklist is prudent. Reviewing your portfolio at the end of the year helps you evaluate the total returns generated over the year and if you are on track to meet your specific goals. Checking the performance of your investments also allows you to make necessary changes to optimise returns.
• Take care of your taxes
  This is another essential task you should add to your year-end financial planning checklist. Although tax filing is due by 31st March, streamlining your tax liabilities by the end of the year will help avoid making last-minute hassles. Assessing your taxes at the end of the year helps you understand if you need to add more tax-saving investments to your portfolio. For instance, adding ELSS funds and NPS to your portfolio allows you to claim deductions of up to Rs. 1.5 lakhs u/s 80(C). Planning your taxes in advance helps you leverage deductions and exemptions to the fullest. Year-end tax planning becomes even more crucial if you file advance taxes where the deadline for the third quarter is 15th December.
• Finish of existing debts and loans
  It’s always best to enter a new year with minimum debt liabilities. So, if there’s one thing you should add to your year-end financial planning checklist, it’s clearing existing debts. Try paying off short-term loans that accrue a high interest, clear off outstanding credit card bills, and attempt partial repayments on long-term loans if possible. However, you should only try to foreclose loans and prepay debts if you have the funds required.
• Increase your contribution to ongoing investments
  Generally, the year-end brings you multiple festive bonuses, gift envelopes, and extra cash. Try directing this extra cash towards investments. Plan for the increment you may receive next year for a proportional increase in your contributions towards ongoing investments. For instance, if you're currently contributing 20% of your income to investments, consider increasing it to 30% next year. Make your year-end financial planning checklist with these factors in mind.
• Review or buy your insurance policy
  Your year-end financial planning checklist is incomplete without including a thorough insurance policy review. If you are already insured, check your current life coverage to ensure it meets your needs. You should revise your insurance cover if you have experienced any major life changes like marriage or childbirth. Adjust nominee details, sum assured, and insurance riders to make your financial safety net much more effective. Alternatively, if you haven’t purchased insurance yet, there’s no better time than the present. Buy a comprehensive life and health insurance plan to start the new year with added peace of mind.
• Start investing
  If you have been investing in traditional avenues like FDs and PPF, it’s time to broaden the investment horizon to market-linked investments. While the guaranteed returns from these conventional investment avenues offer good stability to your portfolio, they cannot help you attain the goal of accelerated wealth creation. To realise this goal, you will have to invest in avenues like stocks and mutual funds that offer inflation-beating returns. You can start by plotting short and long-term goals and assessing your risk profile. Once that’s done, you can choose to invest in equities directly through stock exchanges or go the mutual fund route. Remember that the former requires sufficient market knowledge, while the latter involves professional fund managers handling your funds. Regardless of which option you pick, remember the key to financial success is a well-diversified portfolio.

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Having a year-end financial planning checklist in place can help you tie up the loose ends of the present year and streamline your approach to the coming one. Remember, a well-planned approach is always prudent. However, while you reflect on the passing year and plan, you should also take a moment to appreciate the financial milestones you have attained in the present year.