Summary of "The 2024 Year End Money Checklist (Do These Before Year End!)"

Podcast: The Personal Finance Podcast
Host: Andrew Giancola
Episode Title: The 2024 Year End Money Checklist (Do These Before Year End!)
Release Date: December 2, 2024

As the year draws to a close, Andrew Giancola from Master Money Co. offers a comprehensive guide to financial readiness for 2025 in his episode, "The 2024 Year End Money Checklist." This detailed checklist comprises 22 actionable items designed to optimize your finances, reduce expenses, save on taxes, and set the stage for a prosperous new year. Below is a structured summary of the key points, enriched with notable quotes to provide deeper insights.

1. Review Your Money Automations

Andrew emphasizes the importance of evaluating your automated financial processes quarterly, though the year-end is a crucial time for a thorough review.

• Savings Automations: Assess your savings buckets. Consider increasing allocations or adding new categories based on upcoming financial goals such as college funds, weddings, or down payments.

  "Pop some champagne. It's almost New Year's, my friends." [04:30]

• Bill Pay Automations: Ensure all bills are being paid on time and adjust any automated payments as necessary.

• Debt Payments: Monitor the progress of debt reduction. If credit card debt is increasing, it's essential to ramp up automated payments to mitigate this trend.

• Investments: Andrew stresses the necessity of investing to outpace inflation and enable compound growth, crucial for financial independence.

  "You will never ever be able to retire if you do not invest your dollars." [10:15]

2. Cutting Costs

Identifying and reducing unnecessary expenses can significantly enhance your financial health. Andrew outlines strategies focusing on the "Big Three": housing, food, and transportation.

• Housing: Aim to keep housing costs below 30% of your gross income—preferably 20-25% if targeting financial independence within a decade.

• Food: Allocate around 15% of your income to food, balancing between necessary expenditures and quality of life.

• Transportation: Limit transportation expenses to no more than 7% of your income. Opt for cash purchases when possible and avoid long-term car loans.

• Subscriptions: Regularly review and cancel unused subscriptions. Andrew notes that eliminating small monthly fees can save up to $1,200 annually.

  "If you're investing an extra twelve hundred dollars per year, that is a massive difference in terms of how much money you will have by retirement." [13:20]

3. Review Your Net Worth Statement

Understanding your net worth is fundamental to tracking financial progress.

• Tools: Utilize platforms like Monarch Money for an accurate net worth statement.

• Assessment: Ensure your net worth is improving, liabilities are decreasing, and assets are growing.

  "If you are not seeing your net worth increase, it's time to reassess your financial strategies." [18:45]

4. Give to Charity

Charitable contributions not only support causes you care about but also offer tax deductions.

• Contribution Strategy: Aim to donate around 10% of your income. Consider the annual gift tax exclusion to reduce your taxable estate.

  "Put your money where your mouth is." [21:05]

5. Fund a 529 Education Account

Saving for educational expenses can provide significant tax advantages and flexibility for your children’s futures.

• Usage Flexibility: Funds can be used for K-12 tuition, college, graduate school, or trade schools.

• Tax Benefits: Check your state's tax breaks and maximize contributions accordingly.

6. Fund a Health Savings Account (HSA)

An HSA offers triple tax benefits—contributions are tax-deductible, grow tax-free, and withdrawals for qualified medical expenses are tax-free.

• Contribution Limits for 2024: $4,150 for individuals and $8,300 for families, with an additional $1,000 catch-up contribution for those 55 and older.

• Investment Potential: Invest your HSA funds to leverage compound growth, treating it as a supplemental retirement account.

  "Most people do not know that you can invest your dollars in the HSA. This is why it's such a powerful account." [20:00]

7. Review and Maximize Retirement Contributions

Ensure you are fully utilizing tax-advantaged retirement accounts.

• Contribution Limits for 2024:

  • Roth IRA/Traditional IRA: $7,000
  • 401(k)/Pre-Tax Accounts: $23,000, with a $7,500 catch-up contribution for those 50 and older.

• Catch-Up Contributions: Essential for those nearing retirement or aiming to accelerate their savings.

8. Check Your Tax Withholding

Proper tax withholding prevents underpayment penalties and ensures you are not overpaying throughout the year.

• Business Owners & Freelancers: Adjust withholdings based on additional income streams.

• Year-End Bonuses: Consider increasing withholdings to cover potential tax liabilities.

9. Engage with a CPA

A professional can provide personalized advice tailored to your financial situation, ensuring you maximize tax benefits and compliance.

"Make sure that you are doing all the things now." [17:50]

10. Tax Loss Harvesting

Offset capital gains with losses to reduce your taxable income in taxable investment accounts.

• Implementation: Use Robo Advisors or consult with your CPA to effectively execute this strategy.

11. Consider IRA Conversions

High-income earners who exceed Roth IRA income limits can perform backdoor Roth conversions.

• Procedure: Contribute to a Traditional IRA and then convert to a Roth IRA, taking advantage of platforms like Vanguard for ease.

12. Maximize Flexible Spending Accounts (FSA)

Use remaining FSA funds before the year ends, as they typically do not carry over.

• Employer Policies: Check if your employer allows carryovers and plan accordingly.

13. Estate Planning

Regularly updating estate documents ensures that your wishes are accurately reflected and legally binding.

• Documents to Review: Wills, revocable living trusts, durable power of attorney, and healthcare directives.

  "It's very important that this is happening and that you are reviewing this every single year." [23:10]

14. Organize Financial Documents

Having all financial documents orderly and accessible simplifies tax preparation and financial planning.

• Essential Documents: Tax returns, investment statements, insurance policies, and estate planning documents.

15. Set Specific Financial Goals for 2025

Establish clear, actionable financial goals to guide your financial strategies in the coming year.

• Goal Setting: Break down goals into yearly, monthly, and daily actions for systematic achievement.

  "We are going to break it all the way down to a monthly and daily action basis." [16:00]

16. Increase Your Emergency Fund

Ensure your emergency fund is robust enough to handle unforeseen expenses.

• Strategy: Aim to have at least six months' worth of expenses saved, adjusting based on life changes.

17. Plan for Financial Windfalls

Strategize the use of unexpected income sources like bonuses or tax refunds to maximize financial benefits.

• 5050 Rule: Save and invest half of windfalls while allocating the other half for personal use or enjoyment.

  "Save half. Save and invest half and spend half." [22:00]

18. Rebalance Your Investment Portfolio

Adjust your asset allocation to maintain your desired risk level and investment strategy.

• Action Steps: Increase bond allocations if stocks have outperformed, ensuring a balanced and diversified portfolio.

19. Verify Required Minimum Distributions (RMDs)

For those aged 73 or older, ensure timely withdrawals from retirement accounts to avoid penalties.

20. Enhance Your Security Plan

Protect your financial information by updating security measures and safeguarding against data breaches.

• Actions:

  • Freeze Your Credit: Limit access to your credit report to prevent unauthorized activity.
  • Remove Personal Information: Use services like Delete Me to eliminate your data from online brokers.
  • Password Management: Utilize tools like 1Password to maintain strong, unique passwords for all accounts.

  "Your wealth can be poof, gone in one swoop if you don't protect yourself." [24:25]

21. Final Consultation with Your CPA

Before the year ends, have a final meeting with your CPA to review any last-minute adjustments or strategies tailored to your financial situation.

22. Final Security Checks

Conduct a thorough review of your cybersecurity measures to ensure all personal and financial information is secure.

Conclusion

Andrew's "2024 Year End Money Checklist" serves as an essential roadmap for individuals aiming to fortify their financial standing as the year ends. By meticulously following these 22 steps, listeners are empowered to enter 2025 with confidence, armed with strategies to enhance wealth, reduce liabilities, and achieve financial freedom. Engaging with professionals, leveraging automated systems, and making informed financial decisions are pivotal themes that underscore the episode's actionable guidance.

For those seeking further assistance or tools mentioned in the episode, Andrew encourages joining the Master Money newsletter and exploring his upcoming course, "Money on Autopilot," set to launch in early 2025.

Notable Quotes:

• "You will never ever be able to retire if you do not invest your dollars." — Andrew Giancola [10:15]

• "Put your money where your mouth is." — Andrew Giancola [21:05]

• "Your wealth can be poof, gone in one swoop if you don't protect yourself." — Andrew Giancola [24:25]

By systematically addressing each item on this checklist, listeners can ensure they have a comprehensive and effective financial strategy moving into the new year.