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Year-end financial checklist: 9 personal finance tips for 2021

As 2020 comes to a close, you and your family reflect on where you’ve been and where you’d like to go.

This has been an unprecedented year — one that has greatly impacted people’s well-being, both personally and financially. Like everyone else, you thought it was going to be a different year than how it turned out. As the calendar flips to the new year (thankfully!), here are some things to check off your to-do list before saying good riddance to 2020

Review or update your beneficiary designations

Make any needed updates to the beneficiary portion of your bank accounts, retirement accounts, life insurance policies, and annuities. 

Have you gotten married or had a child within the last 12 months? Or perhaps a loved one has exited your life through a divorce or a death. Choosing a beneficiary for your life insurance policy is a decision you should consider carefully. This is important because beneficiaries trump who’s named in a will.1

To help you keep track of your beneficiaries, write down their names along with the date when any updates were made. Also, be sure to name a contingent beneficiary in case your primary beneficiary passes away. Store this document in a binder and review it annually.1

Don’t forget to name a beneficiary on your IRA 401(k), IRA, Roth IRA, life insurance, annuity, and other retirement accounts so that it doesn’t have to go through probate via your estate, which is costly and time-consuming. Also, if the beneficiary has a common name, it’s a good idea to include the person’s birthdate and social security number, along with their relationship to you. Afterall, you don’t want an unintended beneficiary getting your money.2

Review tax withholdings

Review your tax withholdings and payments. Keep in mind that American society experienced a lot of big events in 2020 that might affect how much you owe in taxes. Did you qualify for coronavirus tax relief or a special tax law provisions in light of a major disaster in your area? Or did you receive unemployment compensation or experience a job loss? Have you pivoted from being an employee to working in the gig economy?

Check out the new and improved Tax Withholding Estimator from the IRS. It’s a handy tool for everyone — employees, retirees, and the self-employed — who wants to effectively tailor how much income tax to withhold.

Review your insurance needs

Health insurance, life insurance, homeowners insurance and auto insurance — oh my!

The types of insurance you can have seem endless. It’s important to reevaluate your insurance policies regularly — to make sure you’re properly insured and are not paying too much for them.

Reviewing homeowners insurance

Homeowners insurance rates can fluctuate due to crime and bad weather near your home, which can have a negative impact on rates. According to Consumer Reports, you can expect that your insurance premiums will be affected by the recent damage caused by wildfires in California, tornadoes in the Midwest, and hailstorms in the western and south-central of the country.4

There are things you can do to help decrease the cost of your premium. For example, increasing your deductible from $500 to $1,000 may help you save 25 percent in premium costs.4

Also, have you accumulated many more possessions since the time you purchased your policy? If so, you might want to reevaluate your homeowners policy to be sure it covers everything of value.

Reviewing auto insurance

Every state has minimum car insurance requirements — and you might need just the minimum coverage. However, make sure your coverage equals your total assets (your house, car, savings and investments) in case the costs related to the accident exceed your coverage limits — and your assets are seized to pay for them.

Your auto insurance might include liability coverage, bodily injury liability (BIL), property damage liability, personal injury protection, uninsured/underinsured motorist coverage, collision, and comprehensive.

Review the types of coverage your state requires and read up on potential rates and discounts or work with a professional to get an affordable rate.5

Consider using the same insurance company for your homeowners and auto coverage. Bundling your insurance may provide you 30 percent in savings. 4

Review your portfolio — diversify if need be

Take a close look at your investments.

In 2020, the world changed overnight. So, too, can your life situation. Make sure your financial plan still fits you. Did you just inherit some money? Or perhaps your job is less secure than it was last year. As your life changes, your investments and financial portfolio might need another review and alterations.6

For instance, stocks and bonds in your investment portfolio should be appropriate for your age and how well you tolerate risk.

Your portfolio should reflect investment objectives that are appropriate for your current life stage. Your age, risk tolerance, tax status and time horizon, among other factors, are all important. Speak with a financial professional regarding your personal situation.

Meet with your financial professional to see how changes in your life may have impacted your overall financial portfolio.

Spend eligible flex dollars

A healthcare flexible spending account (FSA) can save you money — as long as you spend the pre-tax dollars before the end of the year. Otherwise you run the risk of losing it (unless your employer offers a grace period).

In 2020, employees could squirrel away as much as $2,750.6 So, make that last-minute dental or acupuncture appointment while there’s still time. The Coronavirus Aid, Relief, and Economic Security (CARES) Act is giving consumers greater access to over-the-counter medications. For the first time since 2011, you can use your FSA to purchase qualified OTC meds without a prescription such as pain relievers and allergy meds. So, stock up! 7

A tip for next year’s open enrollment period: If you, your spouse or your child is going to need medical services, you should consider contributing to your FSA at least the amount of your health insurance deductible.

Check in on your emergency savings account

In an ideal world, you’d have three to six months’ worth of emergency savings set aside.

However, we know it can be hard to live in an ideal world during a pandemic, which is making it more difficult for some heads of households to care for their family’s everyday needs. However, it’s important that you don’t fall into the camp of the 25 percent of Americans who don’t have any emergency savings.8

Remember that an unexpected emergency, such as a car repair or a medical expense, could set you back financially. To help ensure that doesn’t happen, build up your savings by automatically depositing some money from your paycheck to a dedicated savings account.

If you have kids, contribute to their college fund

College tuition isn’t for the faint of heart. But having a tax-advantaged strategy in place can help you prepare for the rising costs. If you already have one, try to contribute as much as you can.

As you’re preparing your child (or children) for his or her upcoming education, whether it’s elementary, high school or college, there are many different types of vehicles that could help you reach your goals. Speak to a financial professional to explore the possibilities and to see what would be a good fit for your specific situation. 

Make charitable donations

We know that organizations are struggling during the pandemic. In fact, charitable giving was down 6 percent during the first quarter of 2020. And that’s when the effects of pandemic were still in their infancy.9

Donate to an organization that’s close to your heart. The benefits are two-fold: You will reduce your taxable income and feel good about giving some of your hard-earned dollars to a good cause. It’s a win-win.

Start planning for future memories

If it’s realistic, your financial checklist should include a savings plan for a family vacation or another memorable event. It’s nice to have something to look forward to, even if that something will occur sometime in late 2021 — or later. It’ll keep your eye on the prize.

You can open a dedicated savings account and set up an automatic transfer of funds to get you closer to your destination. And don’t minimize how effective dropping your loose change into a change jar can be.

You’re now on your way to moving forward with your future. 


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This information is a general discussion of the relevant federal tax laws provided to promote ideas that may benefit a taxpayer. It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. Taxpayers should seek the advice of their own advisors regarding any tax and legal issues specific to their situation.

Investments will fluctuate and when redeemed may be worth more or less than when originally invested.

1. Anspach, Dana. “Why Beneficiary Designations Override Your Will,”, Updated June 15, 2020.

2. Rae, David. “5 Mistakes to Avoid With Retirement Account Beneficiary Selections,”, October 25, 2020.

3. “IRS: Check tax withholdings now as the last quarter of 2020 begins,”, October 9, 2020.

4. Homeowners Insurance Buying Guide,, Updated July 24, 2019.

5. Sachon, Logan and Swartz, Anna. “How Much Car Insurance Do You Need?”, October 24, 2019.

6. “Using a Flexible Spending Account (FSA)”

7. Adamczyk, Alicia. “You can now use your FSA or HSA funds for over-the-counter medications and feminine care products,”, April 23, 2020.

8. Fottrell, Quentin. "Nearly 25% of Americans have no emergency savings,", June 9, 2020.


DOFU 12-2020