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October 25, 2023

Year-End Planning: Financial Organizing

by Paxton Dolan

Here at Rowling & Associates, we talk a lot about the importance of year-end planning for taxes. Evaluating your tax situation prior to the end of the year for any tax-smart moves you can make goes a long way in reducing your future tax liability. Year-end financial organizing is a great starting point to help in preparing for your year-end tax planning.

Because tax planning is a complex process that involves careful consideration of multiple factors, you’ll most likely need the help of a CPA to complete your tax planning effectively. However, there are plenty of other year-end planning actions you can take all on your own to set yourself up for success in the new year – and there’s no time like the present to get started!

Year-End Financial Organizing

Year-End Financial Organizing

If you’re anything like me, you probably have accounts in a few different places. Even if all of your investment accounts are consolidated with one firm, you likely have at least one bank account. And if you’re working, you may have a retirement plan through your employer that is separate from the rest of your assets.

Taking Stock of Assets

Year-end is a great time to take stock of all of your accounts and document where all of your money is. You’ll also want to make sure that you have valid login credentials for all of your accounts. Some of the larger investment management firms like Charles Schwab or Fidelity update the Terms and Conditions of their site on occasion, and you’ll need to agree to any changes to have full access to your account. Taking a few minutes to check these login credentials at year-end will make life much easier if you are planning on any money movements in the next year.

Password Safety & Security

Once you have identified all of your accounts, it is also a good idea to take stock of your passwords. Have you kept the same password for an account for many years? Do you use the same password for multiple accounts? Are your passwords comprised of names, cities, or phrases commonly associated with you? Unfortunately, identity theft is growing increasingly more frequent, which means we need to put extra care and attention into protecting our accounts!

Change Your Passwords Annually

As a part of your year-end planning process, we recommend changing your passwords every year. It may seem like a daunting task, but it can go a long way to helping prevent unauthorized access in the event your password gets stolen and ends up in the hands of cyber criminals. Often data breaches aren’t even reported until weeks or months after the attack, during which time your password could be bundled with other stolen data and sold en masse to other criminals on the dark web. This could be especially detrimental if you use the same password for multiple accounts. So as you update your passwords, be sure you don’t re-use any for other accounts; this includes financial accounts as well as online shopping sites, social media sites, digital subscriptions, etc.

Dual-Factor Authentication

You should also consider adding dual-factor authentication to your login process as well. This is an extra layer of security, which prompts a code to be sent to your phone or email in the event that you are signing in from an unregistered device. Many retirement plans nowadays require you to set this up when you sign in for the first time, and it is becoming increasingly common for banking and credit card websites to require this option as well. Even if the site you’re using doesn’t require dual-factor authentication, we strongly recommend you add it for any sites that offer the option.

 

Planning for the Future

If there’s one thing the past few years have taught us, it’s that life is unpredictable! Anything can happen at any time, which makes having a plan in place that much more beneficial. Although you never want to imagine the worst happening to yourself, it’s important to consider how your loved ones will be able to access your accounts and other important documents. Taking a few moments as you’re wrapping up the year to get all of this information in order can save your family and friends a lot of time and frustration in the long run!

Ensure someone else has access to manage your accounts and financial affairs

The first thing you’ll want to do is choose a trusted individual (or two!) to sit down with and go over the details of your situation. This can be a friend, spouse, or another family member. If you already have estate documents in place, this can even be the same person you’ve designated to be the executor of your estate.

Share your document containing a list of all your existing accounts with this individual. (Now you see why we recommended taking stock of this yourself first!). Include as much relevant information as you can: institution name, address and contact information, account number, current value, as well as instructions on how to access each account. The Alzheimer’s Association offers a great downloadable financial worksheet you can utilize as a helpful guide when completing this process!

You might also consider setting up an online password vault that stores the passwords for all of your accounts, emails, social media profiles, and even your Apple ID for streamlined access. Remember, if you’ve added dual-factor authentication to any of your logins, your trusted friend or family member will need your phone to be able to access your accounts.

If you don’t like the idea of an online password vault, you can keep a physical document as well – just make sure that you update this regularly, and that it is kept in a secure location like a safe or a safety deposit box which your trusted friend or family member can be granted access to.

*Pro tip for the self-employed: If you are already completing this year-end planning process for yourself as an individual, you may want to consider doing the same for your business. This way, no matter what happens in the future, you can be sure that your clients will be taken care of.

For Business Owners

Similar to the list of accounts mentioned above, you’ll want to generate a list of clients and their contact information so that they can be notified immediately about any potential interruptions in service since, as a self-employed individual, you most likely don’t have a team to step in and cover for an extended leave of absence.

Depending on the type of business you run, your trusted friend or family member may need passwords for software that you use as a part of your service. You should also include any providers your business is associated with – for example, who handles your IT? Who is your internet/phone provider?

In the event that your trusted friend or family member doesn’t work in the same field, you may also want to note for them a few trusted professionals they can reach out to for assistance or refer your clients to. Finally, you’ll want to include a list of what documents on your server your clients are entitled to, and the timeframe in which they need to be provided.

 

Final Thoughts

Year-end financial organizing is an important step to help you stay apprised of your current financial status and prepare for your annual tax planning. It’s also necessary that your financial information is documented and shared with others in order to ensure a trusted person and your estate executor can access and manage your accounts and final wishes when you are not able to.

Learn more about preparing for year-end tax planning or contact us if you have any questions about documenting your finances or other year-end and long-range tax planning strategies.

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