A focused nuts and bolts year end financial review is one of the best activities you can engage in when you want to prepare your money, so it’s working better for you and not against you in the upcoming year.
You came to this challenge because you want to do something different with your finances. You’re sick of being in debt, not having enough money to make ends meet, never being able to live the life you want.
Well, I get that, and I know you can change all of it and have the type of life you dream of. But first, you have to give the critical once over to your money. What did last year’s finances look like? Without knowing the answer to this question, you can’t make meaningful decisions on where to cut, tweak, or revamp. Doing this year end financial review, every year is what will keep your goals and dreams at the forefront of your financial plan.
I sent an email in January asking folks to get ready for this part of the process. I hope you took my words to heart and have everything you need to do your year end financial review and evaluation. If not, take the time this weekend to pull it all together so you can move forward making smart decisions based on facts and not assumptions.
The Year End Financial Review To Do List
Here’s what you need to do:
- Look at your year to date spending.
If you’ve been tracking your spending and savings all year, good for you! If you haven’t, you’ll need to pull these figures together. Most of it can be done via your bank. Most online checking accounts have built-in data you can pull to determine where you spent your money.
If not, you’ll need to do it the old fashioned way by looking at your bank statements.
Either way, this year-end financial review is an important part of the process of evaluating where you’ve been and how you’ll make changes moving forward.
- Revise Your W-4
If you’re currently employed, are you paying taxes at the end of the year or getting a big fat refund check? Either way, you need to evaluate, and possibly with the help of a tax professional, adjust your deductions. Claim fewer exemptions if you owe more than expected and less if your refund is large.
I know lots of you love that year-end refund. But realize this is money that may be better utilized during the year if only you would adjust your deductions. Only you can decide what’s best for you and your family, but at least do a year end financial review and see if changes would be advisable.
- Status of Your FSA
Did you put money into a Flexible Savings Account last year? Did you spend all of the resources allocated to that account? If you didn’t, you wasted precious dollars that could have been used for paying off debt or getting ahead on your mortgage.
Make adjustments to your FSA if you can or make sure you don’t make the same mistake next year by leaving money in that account.
- Pull Your Credit Reports
By law, each consumer is allowed a free credit report annually from all three Credit Reporting Agencies. The best way to accomplish this it to space them out over the course of the year, in essence requesting one every four months. But if you haven’t pulled a report in over a year, pull all three reports now and plan on spacing them out next year. Don’t ever skip this step in your year-end financial review. Make sure you know where you stand with your credit.
- Sign Up for Online Banking
Most banks offer free online banking, and once you fully understand how it works, it can save you time and money. It can automate bill payments and save you money on late fees. It makes budgeting easier as well.
You’ve got some work to do. Focus on these five areas, and you’ll be off to a good start with fixing the nuts and bolts of your money.
6. Review the Status of Your Emergency Fund
Do you have one? What’s in it? Did you save to it regularly all last year? These are all important questions that need your attention each year. The goal should be to create an emergency fund if you don’t have one already followed by making regular monthly contributions. Once you’ve established your emergency fund, reviewing each year to ensure it’s fully funded because often our circumstances change. For example, if you purchased a home that is costing you more than your previous living arrangements, your emergency fund may no longer cover a year’s worth of expenses. Reviewing your fund in this way makes sure you’re protecting yourself and ensuring your family can meet their financial demands if sick or out of work.
7. Make An Appointment With A Tax Professional
I’m a firm believer in using tax professionals to help you maneuver the complicated tax process. If you don’t fully understand the ramifications of your particular set of circumstances, you may be wasting money or losing out on tax benefits you’re not aware of.
This is a busy time of year for tax professionals. Make your appointment this month, and even if you don’t use them regularly, you’ll have someone in your corner you can call with questions when your circumstances change.