Between the tree trimming, gift purchases, and all the other assorted tasks of the holiday season, the end of the year is a hectic time. It’s also a time when we try to relax, enjoy time with our families, and think back on all that’s happened during the year.

Naturally, this often means that the end of the year is when we start thinking ahead to what we hope to accomplish in the year ahead. As you consider your financial goals for the coming months, you should also take the time to develop a comprehensive year-end review to assess your current financial situation and guide your decisions in the future.

By taking the following steps, you’ll be able to outline useful information for you and your financial advisor to determine your next steps.

Update your income and expenses

Take a look at all sources of income you’ve had over the past year. This should include your salary along with any additional income, such as bonuses, money earned through freelance work or other side jobs, and passive income such as stock dividends or earnings from rental properties. You should also consider any income from pensions, Social Security, or other retirement funds.

Do a similar review for your spending over the past year. This should include expenses for housing (rent or mortgage, utilities, insurance, maintenance costs, and property taxes), transportation (car payments, maintenance, gas, and insurance), food, clothing, healthcare, education, and debt payments. Add up any non-essential expenses as well, including money spent on entertainment or dining out.

This assessment will let you determine where you may be able to reduce your spending or expenses. You can also consider getting a budgeting app or starting a spreadsheet for real-time expense and income tracking in the new year.

Analyze your assets

A review of your assets should include anything of value. This includes cash, real estate, vehicles, investments, intellectual property, retirement savings, and valuables.

When reviewing your investment portfolio, check its performance against market benchmarks. If the portfolio is underperforming, you may want to rebalance it so it can better align with your investment goals and risk tolerance.

Be cautious when considering the value of certain assets. For example, when valuing your real estate holdings you should be mindful of any anticipated maintenance or repair costs, along with any factors that may influence property values. Make conservative estimates when valuing items like jewelry or artwork, as their value can vary significantly based on their condition and market demand.

Your review should also assess the current liquidity of your assets, or how easily they can be converted to cash value if necessary. If you anticipate that you’ll need higher liquidity in the new year, you’ll want to begin taking steps to adjust your holdings.

Review your debts

Evaluate any debts, or liabilities, that you currently owe. These may include your mortgage, vehicle loans, credit card debt, student loans, or personal loans. 

Once you have this information, you can calculate your debt-to-income ratio to determine how much of your gross monthly income is going toward debt repayment. A debt-to-income ratio of 36 percent or less is ideal, since it allows for greater financial flexibility.

By regularly reviewing your debts, you can determine a debt repayment plan that works for you. Focusing on higher interest debts will help you save money over the long term. You may also be able to use debt consolidation strategies to save on monthly payments.

Calculate your net worth

Once you’ve completed the steps above, you can simply subtract your debts from your assets to determine your net worth. This measure provides a useful look at your overall financial well-being, helps measure how well you are progressing toward your financial goals, and identifies where you might need to make improvements.

If you want to track your net worth over time, you can create a net worth statement to update the value of your assets and debts at regular intervals.

Review your retirement savings

Check the current balance of your 401(k), IRA, or other retirement accounts. Estimate how much retirement income you are likely to need based on your desired lifestyle, healthcare costs, inflation, and other factors.

Using this information, you can assess your current savings strategy and determine if it is adequate to meet your retirement savings goals. Your financial advisor can review this information with you and determine what changes you may need to make.

Check your insurance coverage

Check your health and disability insurance to ensure that you have adequate coverage for potential medical expenses and lost income. You can also review any life insurance policies you have to determine if their coverage is enough to meet your family’s needs. Review additional insurance policies as well — such as those for your home, vehicles, and valuables — to see if they accurately reflect the value of these possessions.

Depending on your insurance coverage, you may want to update your insurance coverage to better reflect the value of your possessions. You can also review rates and coverage options to find potential savings.

Get ready for tax season

A financial advisor can help you identify strategies like charitable donations and contributions to tax-advantaged retirement accounts that can help you save money on your taxes. You can also review tax credits and deductions that may be available to you when it comes time to prepare your tax documents in the new year.

Consult with a tax professional for further information on maximizing your tax benefits.

Set your financial goals for the new year

A year-end financial review is an excellent way to get a complete view of your financial situation and identify any areas for improvement. This will help you identify specific goals to address in the new year.

Common financial resolutions for the new year include:

Once you’ve determined your financial priorities for the new year, you can create a plan for how to address them. A financial advisor can help you come up with strategies to address your goals, review your progress, and make any adjustments as needed.