Military Finances 101: Year End Checklist

By: Tyler West

It is the end of December, and most of us are preparing for the new year. We are tallying the big accomplishments from the last year and brainstorming our resolutions for the new year: eating clean, exercising, and starting that new hobby we have been eyeballing (probably pickleball). But before we get ahead of ourselves and look ahead to next year, we need to stop and take a tally of our personal finances and complete the personal finance year-end checklist. Consider adding some of these tasks to yours. Remember, this does not have to be done in a single day and can blend into next year too.

Financial Goals

It can be difficult to be successful with your personal finances if you do not have direction. How do you find your direction? You need to set goals for yourself. Consider making a few goals for different periods. A short-term goal for the next year could be reducing your eating out spending by half (making your goal measurable helps you meet it). A mid-term goal could be saving enough to take that big European vacation in the next 2-3 years. A long-term goal could be ensuring a comfortable retirement by contributing at least 5% of your income to a 401k or 403b with plans to increase contributions as your salary increases.

Find Your Assets and Determine How Much You Have

It is important to know how much wealth you have in assets and where they are located. You should track down all your accounts and property and account for their value. This includes checking accounts, savings accounts, high-yield savings accounts, certificates of deposit, retirement accounts, property, and even valuable personal property (like all those pickleball paddles you bought this year).

Find Your Debts and Determine How Much You Have

Similar to your assets, it is important to understand what debts you are responsible for. Start big by accounting for the status of your mortgage, student loans, and auto loans. Then, work your way through the rest of your debts, such as personal loans, credit cards, and even payment plans for items like phones and laptops. Use this information to create a debt repayment plan. Consider making the minimum payments on all your debts, then using any money you have available to pay on the smallest balance. Simply apply the strategy to the next smallest balance when that debt is paid off. Continue this process until you are eventually debt-free.

Figure Out Your Monthly Expenses

You are getting the hang of this now. Account for all your major monthly expenses, such as rent, mortgage, auto loans, insurance, and utilities. Then, go through your checking account and credit card statements to determine all your recurring expenses, such as streaming subscriptions and gym memberships. Finally, keep those statements out and tally up your variable expenses for the last 3 months, such as groceries, clothing, eating out, and entertainment. Add those totals for the last three months, then divide by three to get your monthly averages (feel free to go back further).

Negotiate Your Expenses

The end of the year is a great time to contact your cable company, internet provider, insurance provider, or gym to negotiate your recurring expenses. Set aside time to make phone calls and see if those bills can be lowered. Companies may have new discounted offers, year-end deals, or a discount to ensure they keep your business. Remember to be kind; you capture more flies with honey.

Check Your Budget or Create Your First Budget

It's time to use the expenses you figured out to make or update your new budget. Include all your large, recurring, and variable expenses in your budget, determine what percentage of your spending goes towards certain areas like housing.

Tax-loss harvesting

If you anticipate a significant tax liability for this year, especially from the sale of appreciated assets like stock options, consider using a tax-loss harvesting strategy to offset those tax liabilities. This strategy works by selling financial assets that have lost value. You use the loss deductions to offset this year's additional tax liability. This can only be used to offset capital gains and $3,000 of ordinary income, dividends, and interest. Ensure you do not purchase the same assets within 30 days to avoid a wash-sale violation.

Estate Planning

Check all your accounts and ensure you have designated your beneficiaries. Determine if you need a will and check your will annually to determine if changes are necessary. Wills can be drafted with the assistance of an attorney, but there are many easy options to complete on your own. Create your advanced directives, which are your medical care preferences, created similarly to wills. Have conversations with your family about your desires, and don’t be afraid to seek help from a professional.

Military Finances are Different

While many things finance related are the same for a civilian as for a servicemember, that isn't always the case. Civilians can't get their will done by the JAG for free. They don't have tax-free allowances. Let's face it servicemembers are different than civilians. That's why we think if you're an Active or Retired Military Member, you should work with a financial planner/advisor that deals with your issues every day. If you'd like to find out how we work with people just like you, use the button below to schedule a free, initial consultation.

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