There are only a few months left in the year and this is the perfect time to start financially preparing. Take some time to look through your numbers and see what you need to focus on. Here’s a guide to help you conduct your own financial end-of-year review.
1. Gather Financial Documents
First things first, collect all relevant financial documents, including bank statements, credit card statements, investment account statements, payroll records, invoices, receipts, and any other financial records from the past year. If you are one that keeps papers of all of these documents, get them together to go through them.
2. Income Analysis
Review all sources of income, such as W2 job, rental income, investments, and other sources. Incomes can change throughout the year. Some jobs give bonuses and incentives that can be put in your budget. Maybe you had a decrease in salary because you started a new business. Anything that has changed make note of it while you are looking at your income. Compare your actual income to what you projected in your budget for this past year. Also, think about what your income may be for next year to help when you create your budget. If you have ambitious money goals for next year, maybe think about ways to increase your income (I have a bonus module on increasing your income in my program Flourish FinanciALLI)
3. Expense Analysis
Here is the scary part (not really) but it is the part people like the least. Categorize and analyze your expenses. Review both fixed (e.g., rent/mortgage, utilities) and variable (e.g., groceries, entertainment) expenses. Identify areas where you can cut costs and save money. Some banks or spending apps have graphs that help you put your spending into categories. This can be helpful when you are categorizing your spending. When you are looking at where to cut costs look at those categories that lean towards spending just to spend. You know, like snacks everytime you go get gas or taking a trip to the grocery store every day just because you need 1 thing but end up buying $50 worth of groceries.
4. Debt Review
Review how much debt you have right now, including credit card balances, loans, and mortgages. Assess your progress in paying down debt. Write down your debt and make sure to include the interest rate. List your debts in the order you want to pay them off. I recommend paying off by the highest interest rate first but at the end of the day, you do what you think is best.. If you’re struggling with debt payoff, you need my Debt Destroyer course. As a last resort, consider debt consolidation or refinancing options if it makes financial sense. You can even use this debt tracker to help you pay off your debt.
5. Update Your Budget
Review your current budget if you have one and then create a mock budget for the upcoming year based on what you did in the past. A budget helps you plan and allocate resources effectively. Consider income, expenses, savings, and financial goals. Look at what worked in the past year with your budget and what did not work. If you found you always went over in your eating out category, think about adding more money to that category if you can. Not quite sure where to start? Take my free foundations course to get you on the right track.
6. Investment Portfolio
Do you have investments? If so, evaluate the performance of your investment portfolio. Consider whether your investments align with your financial goals and risk tolerance. Rebalance your portfolio if necessary. Decide what you want to use this money for and invest accordingly. Have you had changes in your life like a marriage, a baby or even getting a better paying job? All of these can change how you need to invest your money and what accounts you should have.
7. Tax Planning
Tax time is coming soon after the start of the New Year so it is time to review your tax situation and consider any potential tax-saving strategies, such as maximizing contributions to tax-advantaged accounts or harvesting investment losses. Note any business expenses you have had for this past year. Have you done any energy saving additions to your home? Have you paid on student loans? All of these need to be accounted for on your tax return. If you have a tax accountant make sure to keep your papers and receipts where you can easily send them for your tax preparation.
8. Emergency Fund
Emergency funds are a necessity now more than ever. Prices are increasing while pay is staying the same for many. Look at your income and see how much you can save for any emergencies that might appear. Any money you can put in your emergency fund will be helpful if you are in need of extra money due to an unforeseen expense. Ensure that you have an adequate emergency fund in place. If not, make it a goal to build one in the coming year. I highly recommend starting with 1-3 months of expenses and then you can increase it once you focus on other money goals.
9. Retirement Planning
Review your retirement accounts (e.g., 401(k), IRA) and assess whether you are on track to meet your retirement goals. If your employer matches a percentage on your 401(k) it would be great if you could match their percentage. Consider increasing contributions if you can and it is needed. Not everyone has the same retirement plan but if you could make your retirement easier, wouldn’t you?
10. Legal and Estate Planning
While this isn’t usually the top of what people want to do it is important to review your will, trusts, and other legal documents. Ensure they are up to date and reflect your current wishes. It is just one more step to making sure you and your assets are taken care of at all times. We just finished our trust this year and I put together this free estate planning workbook so if this has been on your to do list, download it now.
11. Financial Goals
Set specific financial goals for the upcoming year. These can be short-term, intermediate, and long-term goals. Make sure your goals are realistic and specific. Don’t set yourself up for failure by making goals that are unattainable. Start with what you need and make sure you realize it is ok if you need to adjust your goal because something happens in life.
12. Implement and Monitor Progress
Based on your review, create a plan of action for the upcoming year. Implement changes and adjustments as necessary to meet your financial goals. Make sure to regularly monitor your financial progress throughout the year and make adjustments as needed to stay on track. Don’t be afraid to change your budget if it is not working for you. If you need some extra accountability, I highly recommend you joining Flourish FinanciALLI so I can give you personalized feedback and be your accountability partner.
I know this is probably the last thing you want to do BUT it will make the start of the year way less stressful. Your plan may need to be flexible because obviously we cannot predict exactly what will happen but you need to reflect on where you are so you can create a plan to get to where you want to be. You CAN do this!