An End-of-Year Financial Review
Giving yourself an end-of-year financial review is a wonderful way to check on the progress you’ve made toward your goals, highlight areas needing improvement, and update your accounts, funds, and investments. Here’s all you need to know about this essential end-of-year ritual.
Step 1: Review all your debts and create a payoff plan.
To start, list all of your debts and their interest rates. Have you made any real progress toward paying them off this year?
If your debt needs some help, you have two primary options for how to proceed:
- The avalanche method. Focus on paying off the debt with the highest interest rate first. When it is at a zero balance, continue onto the debt with the second-highest interest rate. Move through the list until you’ve paid off all debts.
- The snowball method. Work your way through your debts, starting with the lowest balance debt, and then move to the next, applying what you would have paid to the previous debt. Repeat until all debts are gone.
Step 2: Automate your savings
Make savings easy by making it automatic. Give us a call or text at (435) 723.3437 to set up an automatic monthly transfer from your checking account to your savings account. This way, you’ll never forget to put money into savings again.
Step 3: Review the progress you have (or haven’t) made on financial goals
Have you made measurable progress toward your financial goals in 2020?
Take a few minutes to review your goals, note your progress, and determine how you can move toward better achieving those you didn’t quite reach.
Step 4: Review your retirement account(s) and investments
As you work through this crucial step, be sure to review the following variables:
- Your employer’s matching contributions. Are you leaving money on the table?
- The maximum IRA contribution limits for 2021. You will likely need to make adjustments.
- Management fees and expense ratios for your investments. Fees should ideally be less than 0.1%.
- Your stock/bond ratio and investing style. Do you want to make any changes?
Step 5: Set new financial goals for 2021
As you finish reviewing your financial progress for the past year, look forward to accomplishing more significant financial goals in the coming year.
Set your end-of-year financial review goals that are SMART:
Specific
Measurable
Attainable
Realistic
Timely
Here are some goals you may want to set for the coming year:
- Create a monthly budget before January. Be sure to include all expense categories. Review on the first of each month and tweak as necessary.
- Review the week’s spending with your partner each Friday night.
- Pay off your largest credit card bill by 2022.
- Start a vacation fund in February.
- Cut out two subscriptions you don’t use by mid-year.
- Slash your weekly grocery bill by 10% before May.
Now you know how to do an end-of-year financial review. It was not that difficult, was it? If you need a little help getting your budget back on track, we offer free budget counseling. We wish you a financially healthy New Year!
