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End Of Year Home Finance Checklist

With the holidays just around the corner, the last thing anyone wants to do is review their finances! But, please, don’t rush 2008 out of the door yet! December, with all its hope and promise is the best month to reflect on ourselves; to look back on our past and ponder the potential of the future. Now is the perfect time for us to take stock of our financial objectives, achievements and yes, even our mistakes so that we can greet the new year on a more secure financial footing!

1. The dreaded “B” word. It’s always depressing to think about the household budget and even more so during the holiday season. So, let’s refer to it as “household cash flow analysis”! Either way, go over your 2008 budget. Analyzing your budget will give you a clear picture of your financial “health”. The most important thing to ascertain is whether or not household spending exceeded net (not gross) income. Where did that money go? Did you have unexpected financial emergencies? Or, was the money spent on a series of “small splurges”? Perhaps, you have incurred a heavy debt load. Try to identify problem areas and look for ways to reduce debt and expenses.

1. Money For Life: If you are 40 and over, are you receiving any dividend or interest income? Money we receive without working is the best gauge of our financial “fitness” and a more accurate measure of our success in wealth building. Even for someone aged 42 and over, but not yet retired, receiving at least $4000 to $10,000 dividend income yearly is not an insurmountable challenge. Do you have a diverse portfolio consisting of conservative growth and income funds and solid dividend-paying stocks?

SAVINGS: Did you contribute regularly to these funds? For retirement accounts, if you met the eligibility criteria for full contributions, did you “max out” on these accounts?
1. Emergency Savings: Do you have a financial cushion of safe liquid funds that can help you weather an unexpected financial crisis? Have an emergency fund to cover your expenses for at least one year.

2. Retirement accounts: Don’t let everything ride on your 401(k) or 403(b)! What about a traditional IRA or Roth IRA? If you don’t have one, now is an excellent time to get started and benefit from tax-deferred growth! For 2008, contributions are $5000. Individuals aged 50 and over can make catch-up contributions of $6000. Self-employed? You can set up a SEP-IRA. Contribution limit for 2008 is $46,000 for a SEP-IRA.

1. College Savings: Review your investments in education accounts; Coverdell, 529 Plans, Uniform Gift/Transfers to Minors as well as other products such as a taxable mutual fund or certificates of deposit.

2. Credit Score: Obtain a copy of your credit report from any of the 3 credit reporting agencies and review for any discrepancies. Refer to annualcredit.com.

3. Insurance: Assess your coverage to make sure it is compatible with your current needs and that you are getting the best rates possible. Don’t overlook disability and long-term care insurance. If you are not covered by an employer health plan, you must obtain health insurance. Check with a health insurance broker in your city and purchase a plan you can afford.

4. Estate Planning: Is your will current? Do you have a living trust? Consult with your attorney if you need to make any changes.

5. Giving: The gift tax exemption for 2008 is $12,000.

6. Mortgage: If applicable, did you take advantage of lower interest rates to refinance your home? Can you pay off your mortgage early and own your home outright or at the very least reduce your mortgage debt?

7. Organization: Are your household and legal documents stored in a safe place where you can access them easily. Do you have backup copies? Store confidential or important information on a floppy disc or flash drive.

8. Tax Filing: Get a jumpstart on tax filing for this year by organizing your transaction and expense records, financial, investment and payroll statements, etc.

1. Although you can offset capital gains with losses, it is best to consult with your accountant who can recommend an appropriate tax saving strategy. Check mutual fund statements for year-end capital gains distributions as these can impact taxes.

Helpful Information:
For contribution limits, deductibility, eligibility and income requirements for IRA, Roth IRA, and SEP-IRA, please visit irs.gov.

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