Reflecting on Your Financial Year

As we navigate tax season, it’s a natural time to reflect on the past year’s financial journey. Sorting through tax documents, contemplating your spending habits, and evaluating your financial decisions can be an enlightening process. How did last year treat you financially? What lessons did you learn? How do you feel about your financial choices? More importantly, how will next year look for you? Will it mirror the previous year, or will you make significant changes?

Reflecting on the past year often brings a mix of emotions. Perhaps you feel you didn’t do enough, or you spent too much money—or maybe not enough. These reflections are essential as they guide your financial planning for the future. Did you and your spouse have different views on spending? Did you contribute enough to your favorite charities and causes? Now is the perfect time to evaluate your financial habits and make plans for the coming year.

As we turn the page to a new year, consider these key financial aspects:

Retirement Accounts

If you’re still working, assess your retirement accounts. Should you increase your contributions? Are you maximizing the benefits of Roth or Traditional IRA contributions? Perhaps it’s time to adjust your withholding to ensure you’re saving enough without sacrificing your current financial comfort.

Tax Withholding and Refunds

Take a close look at your tax withholding. Are you receiving a large refund each year? While it might feel like a bonus, it essentially means you’ve given the government an interest-free loan. Adjusting your withholding could allow you to pocket more of your earnings throughout the year.

Roth Conversions

Roth conversions can be a strategic move, but they’re not for everyone. Evaluate your current and future tax brackets to determine if converting some of your Traditional IRA funds to a Roth IRA makes sense for you.

Savings and Interest Income

Is your savings balance sufficient to cover emergencies and future needs? Many people have shifted their money into higher-yield CDs, which is great for earning more interest. However, keep in mind that this interest is taxable, resulting in a 1099-INT at tax time. If you don’t need immediate access to these funds, consider fixed annuities, which typically offer higher interest rates without generating a 1099 until you withdraw the interest.

Social Security Taxation

Understanding how your Social Security benefits are taxed can help you minimize taxes. Strategies are available to reduce the taxable portion of your benefits, which can significantly impact your overall tax liability.

Tax season is an excellent time to review your financial life and plan for the future. It’s a moment to slow down, reflect, and make informed decisions about your finances. Use this time to look back at your financial history, take notes, and identify areas for improvement. Implement these changes early in the year before other priorities take over and you forget.

Personal Reflection

As I write this, I’m returning from a trip to Newport Beach and Huntington Beach, California. Flying isn’t my favorite activity, but I’ve learned to manage my anxiety with a bit of courage and, admittedly, a little beer. During this trip, I observed something remarkable on the notoriously busy LA highways. In the midst of a torrential storm, drivers who usually speed and weave through traffic had slowed down, driving responsibly and maintaining safe distances. It was a rare sight and a reminder of the importance of slowing down and being mindful.

This observation parallels our approach to financial planning. Sometimes, we need to downshift, take a step back, and carefully evaluate our actions. This period of reflection can lead to meaningful changes that improve our financial well-being. Take the time now to review your financial situation, consider any necessary adjustments, and plan for a prosperous year.

Moving Forward

As we embark on a new year, commit to making informed financial decisions. Evaluate your past year, set clear goals, and take actionable steps to achieve them. Whether it’s adjusting your retirement contributions, reassessing your tax withholding, or exploring new investment opportunities, proactive planning is key to financial success.

If you’re not yet a client, consider the benefits of working with a Certified Financial Planner™. Not only will you receive personalized financial advice, but you’ll also have access to quality tax preparation services at a reduced cost. Together, we can navigate the complexities of financial planning and ensure you’re on the path to a secure and fulfilling retirement.

Filing Taxes

If you’re reading this and not yet a client, why wait? As a client, you’ll benefit from expert tax preparation for just $90, as I cover the difference with the CPA. Plus, you’ll have a dedicated financial planner to guide you through retirement and help you make sound financial decisions. Let’s work together to keep your taxes low and your financial future bright.