Your Financial Year-End Checklist

2020 is over, and for many of you, it can’t end soon enough. There will be plenty of time to celebrate the end of one year and to hope for better days in the one ahead. But before we get to that, take these steps to get financially ready for 2021.

1) Review your goals: The end of the year is a great time to review the goals you made at the beginning of the year and set new ones for 2021. How did you do this year? Is there anything you’re proud of accomplishing? I like to start with bright spots because they can guide you toward success as you set new goals. But let’s be realistic, too; 2020 threw us a lot of curveballs.

Was there anything you wish you could have done better? You can also learn from any potential stumbling blocks and figure out how to use them as stepping-stones next year. You may also want to take time now to review your net worth. That’s one way to gauge the progress you’ve made in your financial health this year.

2) Update your budget: Did you save the money that you wanted to? Pay off the debt that you needed to? The end of the year gives you a solid end point to assess whether met the goals you set at the outset of 2020. What if you didn’t have a budget or financial goals? You’ve got a blank slate ahead. Why not create a budget that works? 

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3) Create a holiday bucket: Holidays can be budget breakers, so why not incorporate them into your spending goals right from the start? Christmas may look a lot different this year. But you can still create a separate bucket for holiday spending and when that money is gone, stop spending. You’ll thank yourself in January when you don’t have an unusually large credit card bill.

4) Use it or lose it: Some of your benefits—like vacation days or a medical or dependent care flexible spending account (FSA)—expire at the end of the year. Take stock of what you have left and use these benefits to your advantage. MORE FOR YOUPPP Loan Forgiveness Application Guidance For The Self-Employed, Freelancers And ContractorsSBA Approving Economic Injury Disaster Loans (EIDLs): What You Need To KnowWhat You Can Do Now To Maximize Paycheck Protection Loan Forgiveness

5) Make any last charitable contributions: December 31st is the last day your charitable contributions can be deducted on your 2020 tax return. If giving to charity is a part of your spending plan, you can use these questions to help make the most of your charitable giving.

6) Pump up your 529: Just like charitable contributions, contributions to your 529 college savings plan must be made by December 31st to count for this tax year. Find out if your state is one of over 30 that allow you to deduct your contribution. You can find the specific deduction here. If your state is one of the four that allow an unlimited deduction, keep in mind the yearly gift-tax and super-funding rules.

7) Max out your 401k: While you have until April to make contributions to your traditional IRA, Roth IRA and HSA, you can only contribute to your 401k through December 31st. So, if you have extra cash and are looking to boost your savings, consider contributing your last couple of checks entirely to your 401k. Business owners can do the same with the employee portion of your Solo 401k contributions.

8) Find your tax return: You’ll be doing your taxes before you know it, so use this time to get prepared. Review last year’s return and make a mental list of records you’ll need to assemble. Year-end is also a good time to decide whether a Roth conversion makes sense for you.

9) Review your business structure: Evaluate your business structure and the QBI deduction to identify any changes you need to make to your business. You might want to set up a solo 401k, for instance, and if so, you’ll have to act before December 31st (although you can make employer/profit sharing contributions up to the business tax filing deadline).

10) Defer income and incur expenses: If you’re a business owner, you may also want to look at ways to defer income into 2021 or pay for business expenses you anticipate for early next year. This is any easy way to reduce your tax liability for 2020. However, remember not to spend money on business expenses that you wouldn’t otherwise incur just for a tax deduction. Spending a $1 to save 24 cents still costs you 76 cents.

 11) Will and trust review: The end of the year is a good time to take stock of changes in your life—like getting married or divorced, having children, starting a business or retiring.  Your estate plan should reflect these changes. Get out your will, documentation for trusts you’ve established and powers of attorney and make sure they match your current situation.

12) Insurance documents: Insurance documents also need to cover your current situation. Take a look at your life and disability insurance policies to make sure they protect your current income and those dependent on it. Your renters or homeowners insurance should cover any additional big purchases you made during the year. And lastly, you should review your health insurance policy for any upcoming changes for 2020. For those of you enrolling in the Market Place, you have until December 15th to pick your plan.

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My last bonus task is to enjoy this holiday season. I love the holidays because you can reflect and appreciate what you have. We’ve been tested a lot this year, living our lives through a pandemic, racial unrest and a contentious election. I hope the end of the year brings you comfort and peace. Follow me on Twitter or LinkedIn. Check out my website

Brian Thompson

Brian Thompson

As both a tax attorney and a CERTIFIED FINANCIAL PLANNER™, I provide comprehensive financial planning to LGBTQ entrepreneurs who run mission-driven businesses. I hold a special place in my heart for small-business owners. I spent a decade defending them against the IRS as a tax attorney and have become one as a financial advisor. It’s a position filled with hope and opportunity. It gives you the most flexibility to create the life that you want. I also understand the added stresses of running a business while being a person of color and a part of the LGBTQ community. You may feel like you don’t have access to the knowledge that others do. I’m here to help lift some of that weight from your shoulders.

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Critics:

A personal budget or home budget is a finance plan that allocates future personal income towards expenses, savings and debt repayment. Past spending and personal debt are considered when creating a personal budget. There are several methods and tools available for creating, using and adjusting a personal budget. For example, jobs are an income source, while bills and rent payments are expenses.

Contents

The Economy Shrank 4.8% Last Quarter—The Biggest Contraction Since 2009—But The Worst Is Still To Come

U.S. gross domestic product—a measure of the value of all the goods and services produced by the economy—declined 4.8% in the first three months of 2020, according to data released by the Commerce Department; this is the worst quarterly decline in a decade, but experts agree that the numbers haven’t even begun to reflect the scope of the economic damage caused by the coronavirus.

KEY FACTS

The sharp contraction in GDP reflects the economic toll that measures intended to contain the coronavirus, like social distancing, layoffs, and business closures, have taken on the American economy.

Economic output hasn’t shrunk at all since the beginning of 2014, when it fell 1.1%, and there hasn’t been a drop this steep since the height of the Great Recession in 2009.

After an 11-year period of strong economic performance, temporary unemployment claims ballooned to more than 26 million in a matter of weeks as the coronavirus crisis took hold.

Experts were predicting a contraction of about 4% for the first quarter, and there is widespread consensus that next quarter’s numbers will be even more dire.

Last week, the Congressional Budget Office predicted that GDP growth will plunge a jaw-dropping 40% in the second quarter from the same time last year; the CBO also predicts that growth will slow 11.8% from the first quarter, which would be the biggest loss since the Commerce Department began tracking GDP data in 1947.

Crucial quote

“Prior to the coronavirus shock, the economy was doing relatively well,” Gregory Daco, chief U.S. economist for Oxford Economics, told NPR. “The shock that we experienced in the second half of March actually has led to a sudden stop in spending on a lot of services and even spending on some goods.” Unfortunately, Daco said, that shock is “only the tip of the iceberg.”

Big Number

$3.7 trillion. That’s how high the Congressional Budget Office expects the federal budget deficit will be by the end of the current fiscal year after a month of historic government spending on emergency rescue initiatives like the CARES Act.

What to watch for

Officials from the Federal Reserve will conclude a two-day meeting on Wednesday afternoon. Over the last month, the Fed has rewritten its playbook and made unprecedented interventions to prop up the economy. It’s announced new emergency initiatives worth trillions of dollars, including programs that will extend its reach to small and midsize businesses, as well as state and municipal governments—both unprecedented interventions into markets the Fed has historically avoided. It also cut rates to nearly zero, stepped in to backstop a $350 billion emergency small business loan program administered by the Small Business Administration, and purchased billions of dollars’ worth of government debt and mortgage-backed securities. More action is expected this afternoon.

Further reading

Federal Budget Deficit Will Approach $4 Trillion In 2020, CBO Says, As The Economy Continues To Nosedive (Forbes)

The Fed Will Pump Another $2.3 Trillion Into The Economy. Here’s Why This Time Is Different (Forbes)

Another 4.4 Million Workers File Unemployment Claims As Coronavirus Labor Crisis Deepens (Forbes)

Another Small Business Headache: Some Employees Are Asking To Be Laid Off Thanks To Higher Unemployment Benefits (Forbes)

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I’m a breaking news reporter for Forbes focusing on capital markets and finance. I completed my master’s degree in business and economic reporting at New York University. Before becoming a journalist, I worked as a paralegal specializing in corporate compliance.

Source: The Economy Shrank 4.8% Last Quarter—The Biggest Contraction Since 2009—But The Worst Is Still To Come

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The U.S. economy contracted to start the year… for the first time in three years. The commerce department says gross domestic product contracted at an annual rate of one percent in the first quarter. The government’s initial estimate was of 0-point-one percent quarterly growth. However, experts say it’s only a temporary setback in the long road to recovery. They forecast a robust rebound in the second quarter, fueled by strong demand. Some economists said they are optimistic that growth will remain above 3 percent in the second half of this year… as labor market conditions are improving and consumer spending is picking up.
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