Invest Financial Planning

The Ultimate Financial Checklist For 2022 + How To Prepare

Michele Vendig  |  November 30, 2021

The New Year is a time to review your finances and set long-term financial goals. 

A New Year is a perfect opportunity to take a closer look at your finances and figure out what steps you should take to move even closer to achieving your financial goals. Many of us make New Year’s resolutions around this time of year, particularly related to health and career goals, but financial goals shouldn’t be excluded from the list. (We’d argue that they are among the most important!) Knowing how to position your financial goals is a task in and of itself, but there are a few areas that you should focus on as we head into 2022: investing, estate planning and long-term financial planning. 

Start Investing

Investing is a key element of financial planning. It allows you the potential to build wealth for the future and for retirement. In life, you will always face competing priorities. While it’s important to meet your short-term obligations and enjoy life, it’s also very important to set money aside to invest for the future to help support your longer-term objectives. Longer-term objectives may be retirement, college planning, or purchasing a home. 

Investing for the future may include putting money into a brokerage account, contributing to your company’s 401(k) plan, or setting up a Traditional or Roth IRA. The most important thing to remember is that the earlier you start investing, the more money you will accumulate over the years. Investing requires consistency and discipline. By developing the habit of making regular deposits and contributions, your investments may grow over time.

Thinking about who you are as an investor and how much you are willing to risk in an investment portfolio is always important. To manage investment risk, consider maintaining a broad diversification of your investments that reflects your personal risk tolerance, time horizon, and your financial objectives. Diversification reduces overall portfolio volatility – if one asset class loses value, others will offset the loss with gains. Over time it has been shown that being invested in a portfolio strategy that is broadly diversified increases your probability to have your money grow at a faster rate than inflation, which has remained elevated in recent months. Starting early, being consistent and staying the course will lead to a successful investing strategy and financial outcome.

Estate planning

Estate planning is a critical yet often overlooked aspect of financial planning. Taking time to create an estate plan helps you put your financial affairs in order and may save you and your family time and money in the long run. By documenting your wishes and goals, you create a legal framework that the courts, your executor, and your loved ones can follow when settling your estate upon your death. Without these strategies in place, your family risks going through a lengthy and expensive administrative process.

An estate plan helps to prepare for the unexpected and protect and guide a family into the future. It creates legal parameters for how assets will be distributed to a spouse, children, charity, or family member. It is important to have people appointed to represent your medical, legal, and financial decisions in case you are sick or injured and not mentally or physically able. Having a will, a power of attorney, and a health care proxy in place will provide direction to legal authorities and family members. In addition, depending on the size of the estate and what state you live in, there are planning techniques worth exploring to limit or minimize any estate tax obligations in the future. 

An estate plan may also include guardianship directives. If something happens and you and your spouse can no longer care for your children, a guardianship designation helps ensure you can choose who raises them. You may want to name a back-up guardian as an additional safeguard to ensure that you decide who will take care of your children.

Estate planning also involves gathering and organizing all the account details connected to your assets to ensure your executor and loved ones know what accounts you own and how to access them. Creating a list of your account login credentials for all accounts is an additional step that will allow your family easy access to this information if necessary.  

Determine a 1-Year Goal

 The holiday season is a great period of reflection and creates an opportunity to review our personal “value” statement. The end of the year is a good time to figure out a financial goal that is actionable and attainable within one year from now. A one-year goal may include changing jobs, buying a new home, starting a new business, or taking on a side hustle to increase your income. 

When looking at the year ahead, it is important to consider both your short-term and longer-term financial objectives. Shorter-term may include establishing an emergency fund to ensure you have three to six months of living expenses saved in case a job change or unforeseen expense occurs. 

Longer-term may involve looking at how much you are saving for retirement and possibly capturing additional tax benefits with your savings. This is important considering that income taxes may be increasing in 2022 and putting more money in your retirement plan could help to create tax efficiencies when you file your annual tax return. 

Your one-year plan may also include various personal objectives, such as evaluating job opportunities, determining whether to buy a new home or rental property when interest rates are low, contributing more to a health savings account or flexible savings account at work, or making a gift to a charity or a child or grandchild for their 529 plan for education. 

Another aspect of your one-year goal may be to organize your finances. There are various financial tools available that allow you to aggregate all your financial accounts to view and manage everything in one place. Consider setting up an annual budget to review how much you are spending monthly verses how much you are saving. Creating organization around your financial accounts will help to improve the probability of success in achieving your financial objectives.

Editor’s note: We maintain a strict editorial policy and a judgment-free zone for our community, and we also strive to remain transparent in everything we do. Posts may contain references and links to products from our partners. Learn more about how we make money.

Next Article: