As 2021 comes to an end, we get excited about celebrating the holidays with our friends and family.  Many of us did not get to do it last year, so this holiday season feels a bit more special.  It’s natural to think about Christmas parties and family vacations.  But it’s also a great time to take stock of where you are financially and set some money goals for 2022.

Make sure you check these 5 things off your financial to-do list by the end of 2021.

1.Review your spending and make a plan for 2022

This year has brought a lot of changes to the way we earn and spend money. As a result, there is a good chance your spending habits have changed from last year.

Life is more or less going back to normal.  Maybe you started traveling and eating out again. Perhaps you don’t use that at-home workout app that you signed up for during the lockdowns.  Now is an excellent time to review your spending patterns and see where your money is going.

I’m not a fan of strict budgets because they don’t work in the long term.  However, I like having a flexible spending plan to see how I’m allocating my money between three major buckets – needs (think mortgage payments, rent, utilities, etc.), “future me” (emergency fund, paying down debt beyond minimum payments, savings, and investments), and fun (vacations, dining out, a new bag, etc.).

You are welcome to download our free workbook “Conscious Spending Plan” here.  Simply upload your transactions (I use the Mint app to track my daily spending) into the Excel spreadsheet and voila.  Please make sure to create a copy of the worksheet on your computer so you can customize it and save changes.

This workbook will give you a big picture view of what you’re spending on and will help you make intentional adjustments without feeling deprived.  The key here is connecting your money to your values.

2.Max out your 401(k) contributions

If your company offers a 401(k)-retirement savings plan, take advantage of it and contribute as much as you can.  Your employer may also offer a matching 401(k) contribution.  It’s free money to you, so make sure to max that out.

Check with your human resources department to see how much you can contribute.  Try to save at least the amount that your employer will match.  Otherwise, you are leaving money on the table.

The 2021 maximum contribution limit for traditional 401(k)s is $19,500 ($26,000 if you’re 50 or older) and for IRAs is up to $6,000 ($7,000 if you’re 50 or older).

You have until December 31 to contribute the maximum allowed to your 401(k) account and April 15 for the IRA.

Set a goal to increase your contributions each year gradually.  Consult with your HR people if that could be done automatically. Then, if you get an annual pay raise, you won’t miss this money from your paycheck.

According to Vanguard, a gradual and consistent increase in contributions to your investment portfolio is one of the most powerful tools to help you achieve your retirement goals.

You can’t control the financial markets, but you can control how much you’re saving for your retirement.

3. Review your asset allocation and rebalance your portfolio

Revisit your investment portfolio at least once a year.  So far, 2021 has been an excellent year for the US stock market and not so great for the bond market.  The end of the year is a great time to review your investment mix and make some adjustments if necessary.

Asset allocation is simply a mix of stocks, bonds, cash, and alternative investments in your portfolio.  Over time, the value of your investments changes as some asset classes (for example, stocks) outperform the others (for example, bonds) on a relative basis.  This changes the composition (risk) of your overall portfolio.

Rebalancing means getting it back to the original asset allocation.  You sell the asset classes that outperformed and buy the ones that underperformed.  In other words, you “sell high” and “buy low.”  Without rebalancing, your portfolio may become riskier than you realize.

If you need a little extra help with rebalancing, read my post, “How To Rebalance Your Investment Portfolio In Four Simple Steps.”

4.Fund Investing Accounts for Your Kids

If you have 529 educational accounts for your kids, don’t forget to contribute by the end of the year.  In 2021, individuals can contribute up to $15,000 per beneficiary ($30,000 for gifts from a married couple) without using up part of their lifetime gift tax exemption or having to pay gift taxes.

5.Make charitable donations

As the holidays near, many of us get into the giving spirit.  While donating to causes you care about will make you feel good, it’s practical to remember that money contributed to a qualified charity can be deducted from your taxable income.  It’s a win-win.  So, do good and keep your receipts.

The bigger picture

I know that for most people checking things off their financial to-do list is not as much fun as holiday shopping.  But!  Put in the time now, and you’ll have more to celebrate when you ring in the new year.