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Assessing your finances at the year’s end is always wise, but it can feel daunting—leading to procrastination. If diving into a full review of your 2021 budget seems too much right now, here are some easy steps to begin with.
Verify your contact details
Let’s begin with the simplest task: If you relocated in 2021, ensure your financial institutions and employer have your updated address. Missing an important letter could cause issues with your 2021 taxes, so it’s worth confirming.
Take a moment to review your subscriptions and recurring payments.
Monthly subscriptions can pile up quickly, so it's worth assessing which ones are essential and which ones you can eliminate. Even eliminating just one or two unnecessary charges can free up some cash for other priorities, which is always a win.
Do the same for any recurring payments and automatic transfers, particularly those for services like internet or cable. Often, simply mentioning you’re thinking of canceling can get you a reduced rate. If you’ve already tried this, it’s still worth checking that your bill is accurate—cable providers, in particular, may not always honor their promises, and autopay makes it easy to overlook billing errors.
Change your banking passwords.
Data breaches are an unfortunate reality, and your banking login is one piece of sensitive information that should be protected at all costs. Start the year off right by updating your passwords for all financial accounts, and consider using a password manager if you don’t have one. These tools not only make it easier to manage your passwords, but they also encrypt your data for added security. Many services also offer discounts around this time, so you could even score a deal.
Empty out any remaining balances in your payment apps.
If you use services like Venmo, Cash App, PayPal, or other similar apps, check if you have any unused funds sitting there. Many people do, which means you might discover some extra money. If you find some, consider transferring it to a high-yield savings account, paying off your credit card debt, donating it to a local mutual aid organization, or simply saving it for an emergency.
Evaluate your savings and debt reduction goals.
Whether you’re focusing on saving for retirement, paying off debt, or both, it’s helpful to assess your progress at the start of the year. Did you achieve your goals? If not, what changes should you make to stay on track in 2022?
Don’t forget to factor in external influences like interest rate shifts. In 2019, high-yield savings accounts offered rates up to 2% APY. But due to the pandemic, that rate has now dropped to between 0.40% and 0.60% APY, and the Federal Reserve doesn't expect a rise until 2023. Meanwhile, credit card rates have surged by almost two percentage points over the last two quarters. If the rates on your accounts have changed significantly, it may be time to compare options and see if you can secure a better deal elsewhere.
Prepare for tax season.
As December wraps up, it’s time to face the inevitable: Tax season is approaching. By organizing your tax documents now and consulting with your accountant (if you have one), you can save valuable time and avoid unnecessary stress later.
Unless the IRS extends the filing deadline for the third consecutive year, the 2021 tax filing deadline is set for April 15, 2022. This is also the final day to make tax-deductible IRA contributions, even if you file for an extension—so avoid waiting too long to make those contributions.
Remember, cleaning up your finances doesn’t have to be an overwhelming task. Many of these actions can be completed in just a few minutes. Start with one or two, knock them out, and build from there. You’ll be in a much stronger position as you enter 2022.
