The annual financial checklist

It is important to maintain your automated financial system. Every year I spend a few hours re-examining my system and making necessary changes. For example, have I added subscriptions that I no longer need? Should I adjust my Conscious Spending Plan to reflect new short-term goals? Take some time each year—I recommend December to get the new year off to a good start—to go through each of the following steps.

Evaluate your conscious spending plan

Use these as general guidelines, but take them seriously: if your money meets these suggested percentages, that’s a big win for a rich life.

Fixed costs (50-60%) Investments (10%) Savings (5-10%) Guilt-free spending (20-35%) Reevaluate current subscriptions (cut down if necessary) Renegotiate cable and Internet bills Check spending targets: Are they correct? Are you actively saving for them? If your fixed costs are too high, it might be time to look at cheaper rent (or rent a room to AirBnB, or make more). If you don’t invest at least 10 percent, it’s worth finding the money elsewhere — usually without guilt — and reallocating it to investments

Negotiate all fees

Many companies will offer you introductory prices or lower your monthly fees if you ask. You can use my word-for-word scripts.

Cell phone billCar insuranceCable and InternetBank charges


Confirm that you’re contributing the maximum to your 401(k), that your money is being invested (not just being sent over and sitting there – as a warning) and that it’s being invested in the right funds. You contribute the maximum to your Roth IRA that your money is invested (not just sent over and sits there) and that it is invested in the right funds. Make sure you take advantage of all the tax accounts you can


Review Your Debt Payoff Plan: Are You On Track? Can you pay off your debt earlier? Check your credit report and credit score. Renegotiate the APR on your credit cards

credit cards

Make a plan to use your credit card points! (Some may expire, some may not – but you’ve earned them. Enjoy!) Call and ask what other perks your credit card offers that you haven’t taken advantage of. Confirm that you are not paying any unnecessary fees. If so, try bargaining them down

Earn more


Review your insurance needs, including renters insurance and life insurance. If you have dependents, make a will

Selling your investments

I have never sold any of my investments. Why should I? I invest for the long term. But I still get questions about selling assets. In general, anytime you sell your investments, you’ll be eligible to pay taxes when April 15 rolls around. The government has created incentives for long-term investments: if you sell an investment you’ve held for less than a year, you’re subject to ordinary income tax, which is usually 25 to 35 percent. Most people who buy a stock and make $10,000 in nine months and foolishly decide to sell it actually make $7,500.

However, if you hold your investment for more than a year, you only pay capital gains tax, well below your usual tax rate. Take, for example, the same person who sold their shares in nine months and paid 25 percent in ordinary income taxes. If they held that stock for a year and then sold it, they would only have paid 15 percent in capital gains taxes. Instead of just making $7,500 net, they would have ended up with $8,500. (Now imagine if that happened with $100,000 or $500,000 or millions of dollars. If you save and invest enough by following the IWT system, it’s very possible.) This is a small example of big tax savings, if you keep your investments for the long term.

Here’s the trick: If you’ve invested in a tax-advantaged retirement account, you won’t have to pay taxes the year you sell your investment. With a 401(k), which is a tax deferral, you pay taxes much later when you withdraw your money. In contrast, with a Roth IRA, you’ve already paid taxes on the money deposited, so when you withdraw, you don’t pay any taxes at all.


Since you’ve probably made a good investment, why not hold it for the long term?

Previously, I showed you how buy-and-hold investing produces dramatically higher returns than frequent trading. And once you factor in taxes, the odds are slim if you sell. This is another argument in favor of not buying individual stocks and instead building up a tax-efficient, simple portfolio with reference date funds or index funds. Remember, all of this assumes you’ve made a good investment.

Bottom Line: Invest in retirement accounts and hold onto your investments for the long term.