Paycheck Chronicles

The Year-End Review: Put A Bow On It!


Another year is almost in the books and it’s been a wild one.  Mother Nature left no doubt about who’s in charge, the election, and wild run up to it, decided who would be in charge for the next four years and the world’s stock markets gyrated wildly--seemingly intent on proving that nobody’s in charge of them.  Definitely a year to remember…or forget!

Even so, there’s still work to be done on the personal finance front before we close the books on 2016. So, let’s talk about how to wrap up, review, and recalibrate for 2017.


I’ll start here because when it comes to squaring things with Uncle Sam, time is of the essence.  There are a number of tax items you may want to address before year-end:

Sell losers: If the markets left parts of your investment portfolio in shambles, consider selling losing positions within your non-retirement accounts and using the losses to offset gains and up to $3,000 of ordinary income. Losses that aren’t used this year can be carried forward until they’re gone.  Of course, you’ll want to keep your overall investment mix in mind as you do this.

Clean up around the house: You have until December 31st to make charitable contributions that will be included on your 2016 tax return.  Use a little holiday downtime to clean out the garage, empty the closets, and visit your local donation center. Just be sure to get detailed receipts.

Start gathering the documentation:  Now is the time to start pulling together the stuff you’ll need to complete your tax return in a timely fashion. Donation records, receipts for deductible expenses, documentation of tax-credit-eligible just to name a few.

Pay up early: It might make sense to make your January mortgage payment in December or prepay your 2017 state, local or property taxes or college tuition to allow you to benefit from the deduction on this year’s tax return.

Financial Review

The end of the year is a great time to assess where you stand financially. Take a close look at these three areas:

Net worth:  Add up all of your assets (investments, real estate, etc.) and subtract your debts (mortgage, car loans, credit card balances). What’s your number? Doing this each year and keeping a record can give you some important financial feedback…are you growing or shrinking. Unlike the scale in your bathroom, this is an area where growth is good. It can also give you valuable insight whether it makes sense to boost your liability coverage on your home/renters and auto policies.

Budget: How did you do this year? Is just a little fine tuning in order or is your spending plan in need of a total overhaul? As the year closes, it’s a great time for an honest assessment of how you did with an eye on using your budget as a tool to free up cash to eliminate debt and build savings for the future.

Savings: Are you systematically setting aside money for your financial goals? Commit to increasing (or starting!) your program next year. Whether you just need to set aside money for an emergency fund, start saving for college, or ramp up your retirement investments, the time is now. With a pay raise hopefully just around the corner, remember, each pay raise or promotion is an opportunity to increase what you’re saving without feeling it in your pocketbook.


As the year winds down, set aside some time to review your portfolio. We’ve already talked about turning lemons into lemonade by selling losers and getting a tax break. We’ve also covered the importance of bumping up your savings.  The other important task is reviewing your investment performance and rebalancing your portfolio.  Performance is best assessed by looking at how your investments have fared as compared to their peers.  Don’t compare stocks to bonds or cash. Compare like investments, such as large U.S. company stocks to the S&P 500 index. Remember, diversification is all about having some investments that zig while others zag. By design, you’ll have some investments that do better than others, but you may not want to continue to hold investments that have consistently underperformed their peer group. By rebalancing your portfolio back to your target mix, you’ll mechanically sell high and buy low…a nice combination.

The Year Ahead

As you look forward to what I hope will be a safe and prosperous 2017, it’s not too early to start socking away for the big events of the upcoming year. Whether it’s next summer’s family vacation, or just an effort to take the financial edge off next year’s holidays, start filling that envelope—that’s what I do, but you can use a savings account—to ensure you’re able to have the fun without a financial hangover.

Taking a little time for a year-end review can help you make the most of your finances in 2017.

Happy Holidays!

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