193 | End of Year Financial Routines of the Extremely Wealthy



Welcome to episode 193 of Profit Boss® Radio! In this episode, we’re talking all about the end of year financial routines used by the wealthy.  

Just like there are life hacks and morning routines that lead to great success, there are certain annual financial routines successful entrepreneurs use loyally – but keep close to the vest.

After years of working with business owners every day, I’ve curated an annual financial routines checklist that I myself strictly abide by at the turn of every year, and today I’m sharing it with you. 

Coordinating your business and personal finances is hard. Implementing time-tested and leveraged routines can make a massive difference! 

There are certain things that you absolutely have to have done by December 31. Follow our checklist and not only wrap up 2021 powerfully, get yourself synched to your goals and launch yourself into 2022 with momentum!


Your End of Year Financial Checklist:

Complete 2021

Business Financials:

  • Reconcile all 2021 transactions, unreconciled items are potentially duplicate charges or entries so pay attention to that. 
  • Make sure you clear out liabilities, such as loans to shareholders or payroll
  • File a copy of all of your 2021 statements (don’t count on your financial institutions to keep your statements forever!)
  • Collect on open invoices
  • Prepare and submit vendor information for 1099s (the due date is January 31, 2022)
  • Confirm you have all of your employee data to issue W2s (current address, Social Security #, etc.)
  • Count inventory if you have it
  • Schedule a quick call with your tax preparer to discuss estimated tax liability and make sure your estimated taxes are accurate, sufficient and paid
  • If you don’t pay quarterly estimated taxes, ensure your Tax savings account is fully funded with an appropriate percentage of your expected profits for the year
  • Complete and review your balance sheet, your P&L and your cash flows statement. These you’ll submit to your tax preparer. 
  • Organize your receipts, contracts and donation receipts – this you should be doing all year long

Personal Financials:

  • File investment performance reports in your cloud storage
  • Make all charitable contributions by 12/31/21 – they absolutely don’t count for 2021 if you make them late
  • Maximize your tax-deferred contributions to your 401(k), Roth IRA, or Traditional IRA. Technically you can make Roth and Traditional IRA contributions until you file your 2021 tax return, but 401(k) contributions cannot be late.
  • Update your Net Worth Statement – that’s the most important number in your financial life right now! To do this you’ll need…
    • Credit card statements
    • All current loan balances
    • Investment statements
    • To estimate the fair market value of your home
    • I tend to not include things like jewelry, cars and cash in the bank since you’re probably NOT going to sell the jewels or cars and use the proceeds to live off of and you’re probably going to spend the cash in the bank. 
  • Consider harvesting any losses in your after tax accounts
  • Consider increasing your savings rate
  • Consider a Roth conversion
  • Maximize your Health Savings Account contributions
  • Use Flexible Spending Account balances before you lose them


Create 2022

You really can only create goals powerfully when you’ve organized, viewed and completed everything up to then. Now that 2021 is completed, you know your financial position in the business and your personal net worth, you can create meaningful business goals that actually move you closer to your personal financial (or lifestyle!) goals. 

Some ideas:

  • Add a revenue stream
  • Hire someone to whom you can delegate the things you’re not great at or don’t like doing
  • Open a company 401(k) [this is great for you AND your employees!]
  • Start a charitable gifting program
  • Put your personal time on the company calendar first
  • Double the amount of time on your calendar for sales calls and connecting with clients or customers
  • Put yourself on payroll because you need consistent income! 
  • Open a Profits account and commit to putting 5% of all of your revenues in that account — to be paid out to YOU, the CEO


Resources and Related Profit Boss® Content

Enjoy The Show?


Hilary Hendershott: Hello, Profit Boss. I am here with you today to talk about end of year money routines of the extremely wealthy. And of course, I hope that that’s you. So, one of the biggest leverage points in life really is our habits and routines. Obviously, you know that, right? And something that really, really helped me boost my productivity and my results was when I figured out how to have intermittent or periodic routines so I have a weekly review that I do of my work and the projects that I’m working on, and I pay my bills once a week. And I also have end-of-year routines.

Now, of course, routines are important, but also there literally are some things that have to get done by December 31st or you can’t do them, such as contributing to your solo 401(k) if you’ve got one of those. Now you can, and in fact, you almost have to wait until the following year to contribute to a SEP IRA, so depending on which of those accounts you are deferring income into. Remember the solo 401(k) kind of has to get done by December 31st. So, I’ve been working with business owners for years, and I’ve curated an annual financial routines checklist that I myself strictly abide by at the turn of every year, I’m sharing it with you today. It’s time as I air this episode, you don’t have that much time left, so hopefully, you’ve gotten started on your holiday shopping if you do that. But no matter what, you’re going to want to tie up and check and organize some of the things that we are going to be talking about today. It’s really important to complete the year powerfully. You want to completely complete something. Don’t drag it forward, right? Because it doesn’t make any sense to energetically still be in 2021 once 2022 begins.

So, we’re going to talk about business financials and personal financials. First, definitely reconcile all of your 2021 transactions. Unreconciled items are potentially either duplicate charges or entries, so pay attention to that. Make sure you clear out your liabilities, so pay loans to shareholders, pay your payroll, get all that stuff done. File a copy of your 2021 financial statements, so put those in your secure online storage. Don’t count on your financial institutions to keep your statements forever. I keep three years of bank statements, so those monthly bank statements, I’ve got three years of them in my online storage. I use Box.com, so I’ll just call it your cloud storage.

Collect on open invoices. I can’t tell you how many times the folks that I’m working with really need to be encouraged to go ahead and collect on open invoices. It’s important that you keep that oxygen to your business flowing. Your business doesn’t have lungs that need oxygen. Your business has bank accounts that need money, so collect on your open invoices. Prepare and submit your vendor information for 1099, the due date for those is January 31, 2022. So, anyone you paid more than $600 in 2021 needs to receive a 1099 from you. My bookkeeper does this for me. I don’t prepare those, but the point is make sure you have all that information because you do have to collect their Taxpayer ID and/or their Social Security number in order to do that.

Confirm that you have all of your employee data to issue their W-2s. Of course, you have a liability or obligation to do that as well. You’re going to need their current address, their Social Security number, etc. Count inventory, if you have inventory, if you have a product business, you’ve got to count your inventory for the end of the year. Schedule a quick call or shoot an email over to your tax preparer to talk about your estimated tax liability and make sure your estimated taxes are accurate, sufficient, and paid. If you don’t pay quarterly estimated taxes, ensure your tax savings account is fully funded with an appropriate percentage of your expected profits for the year.

Complete and review your balance sheets, your P&L, and your cash flow statement, those you’ll need to submit to your tax preparer so that person can prepare your 2021 taxes. And organize your receipts, contracts, and donation receipts, of course, this you should be doing all year long. Every time I have an invoice come in that I pay that gets filed in a particular folder. I give a lot of charitable donations over the course of the year. Immediately, I’m going to receive an email. Sometimes, unfortunately, I have to print it to PDF. I think it’s a little annoying when they don’t send me a PDF invoice for a donation, but I name it with the charity, the date, and the amount of the donation, so at the end of the year, I go into my donation receipts folder. I can literally just add up the numbers on the names of the files rather than having to open them all again, so that’s super handy.

Let’s talk about personal financials. Okay, file your bank statements and investment performance reports in your cloud storage, you want to keep copies of those. Make sure that you make all of the charitable contributions that you want to count for 2021 by December 31, 2021. They absolutely do not count if you make them late. Maximize your tax-deferred contributions to your solo 401(k) if you’re contributing to a Roth 401(k) or a traditional IRA. So, technically, you can make Roth traditional and SEP IRA contributions until you file your 2021 tax returns, but again, 401(k) contributions can’t be late.

Update your net worth statement. That’s the most important number in your financial life right now. I’ve done 190 somewhat episodes of Profit Boss Radio trying to help you grow your net worth, so track it. You want to update it, keep track of it. Make sure you’re adding the balances of your real estate owned, your investments. I don’t tend to include my bank account balances in my net worth. I don’t include the value of my cars or my clothing because I’m not clothing, jewelry, things like these that people like to put on their net worth statement because I’m probably not going to sell that stuff and use it in my financial life to live my life. And that’s what the net worth is. You’re tracking your investable net worth or the amount of money. It’s basically the sum of what you own in the house that you live in and the value of your businesses and your investment statements. Those are the things that will contribute to your financial life later. So, you need a house to live in. A lot of people want to own their house. So, that goes on the net worth statement.

And then, of course, there’s the money that you’re going to use for financial freedom. These two numbers, in a nutshell, are your net worth. You want to include any credit card balances that you have. So, that’s a hit to your net worth. All your current loan balances, again, investment statements, the fair market value of your home. You can use Zillow. I know real estate agents hate Zillow, I got it, but you have to pick a number somehow if you happen to have a recent appraisal of your home, definitely do that. Consider harvesting any losses that you might have in your after-tax accounts. So, this means you bought it for, just say you bought a stock for $100, and now it’s only worth $80, you have $20 of unharvested losses. So, if you harvest those losses, now you’ve locked that in, you can wait 30 of 31 days and repurchase that same stock, or you can diversify and buy a better investment. But that’s not the point, the point is now you have losses that you can use to cancel out harvested gains in the future. So, if you have $20 of losses, later, you have $20 of gains that would have cost you $5 or $10 in taxes, but now, you owe nothing. So, carry forward losses are, I use the term silver lining, there is a silver lining to losing money in the stock market.

Consider increasing your savings rate. If you follow my Profit Boss Automation methodology, you’ve got a particular number going into your Tomorrow’s Dreams accounts, both short-term goals such as buying a house, your next car, your next vacation, holiday gifts, but then also included in your Tomorrow’s Dreams balances are your retirement accounts. Okay, so consider increasing your savings rate. Hopefully, in 2021, you’re making more money. So, don’t just rest on your laurels and keep that savings rate the same, ratchet it up. And that’s really how you exponentially increase the amount of your net worth number.

You could consider a Roth conversion in 2021. We are doing Roth conversion, so you convert an IRA balance to a Roth. You pay the full ordinary income tax on that amount and then you never have to pay tax on Roth balances again. The federal government wants you to keep those Roth balances intact for five years before you go ahead and distribute them or spend them. We do this for two reasons. One is because obviously, you have more control over your tax rate. If you have Roth balances, you can pull money out. You don’t owe ordinary income. So, if the federal government increases the marginal tax brackets on you, you can pretty much take a hike signal. And the other reason is that for some of my clients, especially, they’re going to have required minimum distributions from their traditional IRA accounts that exceed the amount that they want to spend.

So, when you turn 72 in this country, you’re literally forced to take money out of your IRAs and pay ordinary income tax on them. So, if you convert to a Roth earlier, you make those traditional IRA balances smaller and then you can minimize or avoid unwanted required minimum distributions. Definitely maximize if you have a high deductible health plan, go ahead and maximize your health savings account contributions, put the max in there because that is not a use it or lose it opportunity. You can carry forward health savings account balances, and they kind of turn into retirement account balances if you don’t use them on health costs. If instead of a health savings account, you have a flexible spending account, those are use it or lose it. So, you want to use your flexible spending account balances before you lose them at the end of the year. Go get that that pair of glasses or I don’t know, see a chiropractor if you can use your balances on chiropractors.

So that should bring you to the end of 2021. So, now, you’ve completed 2021, you’ve submitted your business financials and your personal income records to your tax preparer. Now, you’re ready to create 2022, and this is where it gets fun. I’m not going to lie, completing the year financially, it’s not super exciting. I do it because I feel so darn good when I’m organized, and I do it every time, I’m totally reliable to do it, but it’s not nearly as fun as the creation part of the process. So, you really can only create goals powerfully when you’ve organized, viewed, and completed everything up until then. So, now that 2021 is completed, you know your financial position in the business and your personal network, you can create meaningful business goals that actually move you closer to your personal, financial, or lifestyle goals.

So, some ideas, hey, in 2022, maybe you want to add a revenue stream, maybe you want to start working on that book you’ve been thinking about for years. Maybe you want to raise your prices, maybe you’re afraid to raise your prices, but you kind of think you should. I think you should do it. Some other ideas for 2022, hire someone to whom you can delegate the things you’re not great at or don’t like doing, open a company 401(k). I love that I have a company 401(k) and I do a full, what they call safe harbor match for my employees.

First of all, I think it’s totally on brand for me. It absolutely goes with my business values and principles and what I love, which is helping people, you and the people who work for me grow their net worth. So, it’s a great retention tool. Start a charitable gifting program. I love to give gifts to charities. I give money to lots of charities all year round, and it’s something that I feel really good about. So, you could start that. Hey, go ahead and put your personal time, your vacations on the company calendar first. If you’ve been going around and wondering why you never get to take a vacation, or it always seems like a hassle, you have to move appointments around, you feel like it’s a problem.

Maybe if you’re like me, there have been times when you actually felt torn, like I feel obligated to take a vacation for myself and my family, but I feel like I’m putting my employees out and I hate rescheduling appointments with clients. So, if you put your personal time, your vacations, and all that, I actually have think days that I schedule, think like a couple of days to just really read those business books I’ve been meaning to go to, and really get into the deep thinking of where do I want to take my business and what do I want to do next, what do I want to put in, and what do I want to take out. Schedule think days. It’s really an incredible leverage point.

If you’re not on the payroll in your business, hey, in 2022, put yourself on payroll, you need consistent income. You absolutely have to have it. Business and the economy might be inconsistent. They’re a little bit variable, but your personal bills are pretty darn consistent, right? And again, if you follow my Profit Boss Automation, you’ve measured your yesterday’s promises and your today’s fun. If you’re wondering what the heck I’m talking about, search in my podcast stream feed for the Profit Boss Automation, Automate Your Financial Success is the name of the episode.

Hey, another idea, open a profits account now that we, me and my team, are Profit First certified, I’ve been talking a lot more about that profits account and commit to putting 5% of your revenues in that account. The profits account only gets paid out to you, the CEO. It’s like your reward for doing good and profitable work. And profit is what we’re all here together about, right? Profit Boss is the name of the podcast. Use your profits to grow your net worth. Use your net worth to create financial freedom, which is what we’re all about.

I hope that you enjoyed this end of your checklist. If you have additional things that you think I should add to the checklist, send them to me at hello@hilaryhendershott.com. Thank you for being a loyal listener all year round. And I’m just so excited to wrap up 2021 and create 2022 powerfully.



Hendershott Wealth Management, LLC and Profit Boss® Radio do not make specific investment recommendations on Profit Boss® Radio or in any public media. Any specific mentions of funds or investments are strictly for illustrative purposes only and should not be taken as investment advice or acted upon by individual investors. The opinions expressed in this episode are those of Hilary Hendershott, CFP®, MBA.


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