Use the Holidays to Reset Your Financial Picture
As Americans decorate their homes and make progress on gift lists, the final weeks of the year offer a natural moment to reassess financial health. The story of 2025 was one of contrasts: rising tariffs fueled volatility, the job market softened, and inflation lingered, yet an AI investment surge and strong high-income spending kept parts of the economy afloat. For many households, though, an affordability squeeze continued to define daily life.
If you want to enter 2026 with clarity and momentum, experts say four year-end steps can make a meaningful difference.
1. Look Back Before Looking Ahead
Financial advisors recommend starting with an honest review of the past year. Identify what went well and where your budget drifted. Jack Howard of Ally Financial suggests shifting from self-criticism to constructive reflection. Review your spending categories, assess whether your current budget matches your values, and make adjustments that support your long-term goals.
Check your emergency fund and replenish any withdrawals. Reevaluate insurance coverage, debt balances, estate documents, and powers of attorney. These foundational reviews can prevent unwelcome surprises in the new year.
2. Prepare Early for Tax Season
April may feel far off, but laying the groundwork now reduces stress later. Confirm your withholdings to avoid an unexpected balance due. Gather receipts and track deductible expenses. If you plan to itemize, consider whether charitable donations make sense before December 31.
Tax-advantaged accounts deserve attention, too. Use remaining Flexible Spending Account funds before they expire, and consider adding to a 529 education plan or similar option. For taxable investment accounts, tax-loss harvesting can help offset gains. Accountant Miklos Ringbauer notes that this strategy is not just for the wealthy, but should be pursued with professional guidance.
3. Strengthen Retirement Planning
Year-end is also an ideal time to maximize retirement contributions. For 2025, the 401(k) limit is $23,500, while IRAs allow $7,000 for those under 50 and $8,000 for those 50 and older. Advisors emphasize the long-term value of pushing these contributions as much as possible.
Depending on your income and tax status, a Roth conversion could be advantageous. If you are 73 or older, ensure you have completed required minimum distributions to avoid penalties. Qualified charitable distributions may also reduce tax exposure. Finally, confirm that account beneficiaries are current.
4. Build a Plan for 2026
Once the books close on 2025, look ahead. Set specific goals for 2026—whether paying down debt, building savings, investing more consistently, or preparing for a major purchase. Schedule periodic check-ins to stay accountable.
It is also worth reviewing how recent legislation, including the One Big Beautiful Bill Act, may affect your household. The law offers advantages for high-income earners, families with children, car buyers, some hourly workers, and those earning overtime. Lower-income households, safety-net recipients, and borrowers with student debt may see fewer direct benefits.
With thoughtful adjustments and early action, you can use this transition period to enter the new year with confidence and resilience.
