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Common Year-End Planning Strategies

With the holidays right around the corner, many people think about spending time with family, travel plans, and ironically their finances. It might surprise you that finances made that list, but after over a decade in the industry, I’ve learned that the next several months is when people place the greatest emphasis on their finances.

Whether this focus comes from feeling the pressure of accomplishing resolutions before the year ends, or year end deadlines set by the IRS, there are several common ways to help make your year-end planning more effective.

Paying Attention to Deadlines

With only weeks left in the year, it is a good idea to focus on the items that might have time constraints. Everyone’s financial situation is different, but here are some common items with time constraints along with their corresponding deadlines.


The good news is that if you are focused on making contributions to individual accounts such as Traditional IRAs, Roth IRAs, or Health Savings Accounts, you have time. You can make contributions to IRAs and HSAs for the current tax year until the tax-filing deadline, which is April 15, 2020.

Even though there is time to make contributions for the current tax year, it might be helpful to plan so you are not scrambling right before the deadline.

The bad news is that if you are planning on making contributions to employer-sponsored plans, such as a 401(k), pay close attention to deadlines because typically those are due by the end of the calendar year.

As you consider maximizing year-end contributions, it is important to keep the contribution limits in mind. Assuming you are under age 50, the IRA contribution limit is currently $6,000 per person and the 401(k)/403(b) contribution limit for employees is $19,000 per person.

Employee Benefits

Employee benefits vary from company to company, but two common benefits worth monitoring this time of year are your health insurance and flexible spending accounts (FSAs).

When reviewing your health insurance, it might be worth looking into your deductible and out-of-pocket maximum and any potential procedures, visits, or prescriptions. Individuals or families that already reached their out-of-pocket maximum might consider accelerating healthcare expenses to reduce the net costs.

For example, last year my wife and I had a child and some other medical events, so we reached our out-of-pocket maximum with several months to spare. We could accelerate some flexible visits, prescriptions, and procedures to reduce the net cost compared to if we waited until the next plan year when our deductible and limits reset. If you explore this option, it is important to keep your plan year in mind since it may differ from the calendar year.

Another common consideration related to year-end planning is checking in on your FSA. It is important to understand whether your employer offers any carryover or if you will lose the unspent balance. Based on that information, you can decide how to leverage the account between now and the end of the year and plan for next year.

Revisiting Your Resolutions

Besides external deadlines, many individuals place more of an emphasis on their finances at the end of the year because of self-created objectives they set at the start of the year.

Strategically, reviewing your progress towards your financial resolutions can be a great opportunity to close the year strong and lay the foundation for a productive new year.

Reviewing What You Spend

The most popular financial resolution relates to spending, so it makes sense to dive into the details. You can tackle this on paper, in Excel, or assuming a personal finance app like SoFi Relay. Either way, start by understanding how much you spent so far this year and how that money was spent.

Then compare that to your goal. This may seem like a tedious task but having transparency into how you spend money has been shown to help reduce spending and “bad debt.” Rather than spending countless hours on this, consider using an app so data is updated in real-time and makes next year much more efficient.

Reviewing What You Save and How You Invest

Once you understand where you money is going, the next step towards accomplishing your financial resolutions is to understand how you put your money to work for your future.

This is aligned with the contribution limits discussed above, because you may want to catch up on savings to hit your annual target.

This is also a great opportunity to review your investments. There has been a fair amount of volatility in the market this year, but overall the market is up significantly.

It is important to review your investments periodically to make sure that your overall investment strategy still aligns to your comfort with risk and goals. As certain investments grow and others decline, the investment mix you started the year with might not be in place right now.

Planning for the New Year

The final way that you can close the year out strong is by setting yourself up for success in the new year.

Rather than waiting until early next year to define your goals and develop a plan, we suggest that people start now so they can hit the ground running. There are several common things to focus on as you develop your plan.

Starting With the End in Mind

It is important to identify your financial goals for the short and long term. Not only will this impact what actions you need to take, but this can also impact your motivation to make sacrifices along the way. Think through bigger picture goals such as buying a home, paying down debt, or retirement.

You can also think through short-term milestones that will help measure progress along the way such as paying off a particular debt or funding an emergency fund. If you are in a relationship, it might be beneficial to go through this exercise together.

Determine How You Should Save and Spend

Once you define your goals, you can work through what it will take to accomplish them. Typically, it is better to build a budget by allocating money for goals first rather than saving or paying down debt with whatever is left over.

Once you know your take-home pay and how much you need to allocate towards your goals, you will have your annual spending target. This is how much you can spend the next year while still helping to set yourself up for success in the long run.

Some people prefer managing their money by focusing on the big picture, while others prefer to get into the weeds. If you want to focus on the big picture, you can use the spending target to guide your spending every month.

As long as you spend less than your target, you’re likely on the right path. If you want to focus on the details, you can break this spending target down further into various budget categories such as housing, transportation, dining, etc. Either way, you should be able to enter the year with a budget that meets your financial personality and unique circumstances.

As you begin thinking through how you plan to finish the year strong and set yourself up for success next year, remember that SoFi members can talk through the options with a financial planner at SoFi. Our financial planners can help you build a budget, understand your options, review your investments, or even provide a second opinion on your current plan.

Schedule a complimentary call with a SoFi financial planner today.

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ABOUT Brian Walsh Brian leads the financial planning team at SoFi and is a CERTIFIED FINANCIAL PLANNER™ professional. As a self-proclaimed financial planning nerd, he leverages research, member feedback, and past experience to deliver advice that is both meaningful and practical.

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