My favorite time to review my financial plan has always been right after Christmas and into the New Year. When I was a corporate employee, employers encouraged us to take off that week. As a small business owner, those clients who want to meet also suggest year-end as a good time for financial assessment.  Take a little breather from the business pace to reflect what you’ve accomplished this year and want to accomplish next year for your family’s financial wellbeing. Although the business has its own goals, marketing plan, and spending plan analysis, here is the perfect time to look at the whole picture as you build your personal and business financial fitness.

Family income — In conjunction with my accountant, we set the ‘paycheck’ we’ll get from the business next year. 

Business spending — As I review my QuickBooks for the year I take another look at what spending happened this year and whether there are any ways to decrease spending and increase margins in the upcoming year.

Business cash — Make sure the business has enough money saved to cover critical months when income might be light.  For many businesses that is January & February.  Although this may seem late, it’s important to keep in mind before committing money to new equipment, last minute retirement account stuffing, or giving out bonuses.

Plot my reserves — I have several earmarked buckets for emergencies, business expansion, equipment and vacation. Having different buckets assigned for each category of savings helps me prioritize and align my reserves with my goals.  Do I want to fill the vacation bucket more than the home maintenance bucket next year?  Some years you need a roof or a heater or other major expense.  To get ready for that big expense, use your buckets when planning for the year ahead.

Plan a savings change — Each year, set goals for your savings.  Decide how much goes into each bucket on a monthly basis and which bucket gets a boost when there is a windfall month. Also, select which one(s) will get shortchanged when there is an income shortfall month.

Retirement planning — On Winter days when it’s cold outside, we’re sitting by the fireplace and dreaming of warmer weather. Our thoughts may turn to longer vacations somewhere warm, like a month in California, or a couple months in Florida or Mexico?  Sounds like retirement, partial retirement or just slowing down enough to enjoy life.  Look to your retirement accounts, your contribution amounts and whether/when you be able to afford this.  Of course many people get a financial planner to help with this.

Debt targeting — Not all debts are equal, and not just in the interest rates they charge. For example, paying down an equipment loan or a Line of Credit can give you the flexibility of buying additional equipment that may need financing.  Alternatively, paying down a student loan may not increase your ability to take out another strategic loan.

End of year moves — If suitable increase your 401(k) contributions or your Solo(k) if you’re self-employed.  You have until April 15th to contribute to your IRA or Roth IRA. Many people can contribute to a Roth IRA even if they are contributing to a 401(k).  Ask your financial planner if you qualify.

By taking the time to review your financial planning status at year-end, you’ll not only make great use of the winter, but also get a great start on making next year’s financial planning.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 ½ or prior to the account being opened for five years, whichever is later, may result in a 10 percent IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

 Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

Merra Lee Moffitt, CERTIFIED FINANCIAL PLANNER™ Practitioner, is a Senior Partner at Good Life Financial Group, Wyomissing. She loves helping small business owners pursue the financial results they dreamed from the success of their businesses. It’s part of her financial planning process. Call, click or contact at 610.628.2055, www.Welcome2TheGoodLife.com/MerraLee and merralee.moffitt@lpl.com.