A Yearend Personal Finance Checklist

‘Tis the season for making a list and checking it twice … and not just for Santa in his quest to find out who is naughty and nice. You might also find it helpful to knock out a personal finance checklist during yearend downtime. What to include? Read on!

First, consider whether your financial goals and needs have changed.

Various life events—a new job, a marriage or divorce, a new home or retirement—can trigger changes to your money’s primary purpose (your goals) or how long your investments must work toward your goals (your time horizon). Either or both could make it sensible to revisit your asset allocation—the blend of stocks, bonds, cash and other securities comprising your portfolio.

First, check in on your goals. Generally, this is growth, cash flow or some combination of the two. To know the best balance for you, consider your primary purpose for investing and if it has changed. Are you newly retired or about to? Are major new expenses about to start, such as funding long-term care? That may mean your primary purpose has shifted to generating cash flow. Have you promised to help pay your new grandbaby’s college tuition in 18 years? That may put more emphasis on long-term growth. The two, though, aren’t mutually exclusive in most cases. Folks who need cash flow very often still need growth to defray inflation’s impact or generate enough return to ensure their portfolio’s longevity, especially with things like medical costs potentially rising late in life. The key in an annual checkup is simply to identify and weigh whether something has shifted and what that means.

Some of these may also trigger changes to the second main consideration, time horizon. Plans to leave money for a younger spouse, heirs or a charity would extend your time horizon past your own lifetime. Did you get married this year? Have new grandchildren you want to support after you are gone? Think about how changes to your family situation may lengthen the time your money needs to work. Conversely, a major near-term cost—like a new home purchase—or other need could shorten it, at least for a portion of your assets. Is this the year you finally splurge on that mountain cabin or beachside cottage? Separately, changes in health or life expectancy—like a diagnosis or major weight loss—could also justify an adjustment.

Third, reassess your comfort with market volatility. Did the temporary pullbacks this summer and early autumn cause you to lose sleep? Be honest with yourself about this. Or, are you carrying too much fixed income and cash, muting returns? Note, this isn’t about heat chasing—it is about honestly assessing and weighing your comfort with enduring potentially greater ups and downs in exchange for higher returns that may deliver a higher likelihood of reaching your goals.

Your goals and needs can help determine which asset allocation is best for you, but keep in mind the tradeoffs: Stocks’ long-term returns are a tradeoff for their higher expected short-term volatility, while bonds’ lower expected short-term volatility comes as a tradeoff for lower long-term returns. Thus, knowing your goals, time horizon and comfort with volatility can help determine the right blend of the two for you. Generally, shorter time horizons and higher cash flow needs point to higher fixed income allocations to decrease the likelihood of having to sell securities in down markets.

Next, update your personal and/or household budget.

Here, we would start by taking stock of your 2024 spending. Tally your monthly expenses and separate them into two categories: essential and discretionary (this will help you distinguish where spending can be cut, if needed). Then, compare this against your existing budget to help clarify how inflation changed your spending versus what you previously planned. Also consider whether you accurately assessed your spending needs and/or plans. Take stock. Are you surprised by how much or how little you spent? Inflation can sneakily stack up everyday costs, so this might warrant a budget adjustment.

Moreover, if you are currently taking portfolio withdrawals, compare your actual 2024 withdrawals against the amount you originally planned. If you took more than budgeted, is this sustainable? Overall and on average, it is beneficial to limit withdrawals to somewhere around 4% of a portfolio’s starting value annually, adjusting for inflation over time. That is just a rule of thumb and personal situations can of course differ, but it is a useful guide nevertheless. If your withdrawal rate is well above this, you could risk depleting your savings.

Finally, check your portfolio for overconcentration.

Mind you, this isn’t solely a yearend task. It can be beneficial to check in periodically—but if you haven’t done it, now is a good time. Consider: Tech and Financials stocks outperformed broader markets this year. For some folks, this might result in the sectors holding outsized portfolio weights. One way to check this? Compare it against a broad benchmark like the MSCI World Index. Tech makes up roughly 26% of the MSCI World’s market cap, while Financials is about 16%. So if your portfolio is half Tech or Financials, it is probably time to cut back.^[i] Even if you expect these sectors to continue outperforming, this lopsidedness disrupts diversification. Always remember you could be wrong—if the sector or region dominating your portfolio doesn’t perform as you expect, not only would it drag on your returns, but it would leave you very underexposed to the areas of the market that are leading. Those missed returns can be a big opportunity cost.

Which brings us to what to do with the proceeds: Look at the rest of your portfolio to see if you have blind spots to a particular sector or region. Even if you don’t expect certain areas to do well, having just-in-case exposure limits the risk in case your primary expectations prove wrong. Here, too, you can compare your portfolio’s weightings to the overall market’s. If your portfolio is mostly devoid of Industrials, or if you have been shunning Energy or Materials, then allocating the proceeds of your trimmings to these areas to improve diversification will likely be beneficial.

While this checklist isn’t exhaustive, it covers what we think are some of the most important personal finance items out there. So feel free to share this with friends and loved ones. Checking these boxes can lend to a happier, brighter and financially healthy 2025.