As the year wraps up, it is the perfect time to review your finances from this year and ensure your financial health is on track. A quick review can help you see the bigger picture – whether you are working towards an emergency fund, saving for retirement or boosting your credit score. How much did you spend on eating out? How much did you save? Here is a straightforward guide to help you get started with your annual financial review.
Look at Your Income and Spending
The first step in your annual financial health check is calculating your monthly income and examining where it goes. Write down all sources of income, including salaries, any side hustle income and passive earnings. Then, review your spending habits by breaking them into broad categories such as food, rent and entertainment. Don’t forget to include any subscriptions. Reviewing your credit card statements and bank records can reveal actionable insights that will help you save money next year, such as unnecessary subscriptions you may no longer need.
Check Your Savings and Build an Emergency Fund
Having an emergency fund for unplanned expenditure is key to financial well-being. Look at your current savings and decide if they are enough to cover three to six months of essential expenses. If not, work towards gradually building this fund. Also, take a look at any long-term savings and assess whether you met your financial goals for the year. If your savings goals fell short, look for ways to adjust your budget or cut unnecessary spending to free up extra funds.
Set New Financial Goals for the Coming Year
You cannot maintain good financial health without having clear goals to aim for. Reflect on what you want to accomplish next year, such as paying off debt, saving for a big purchase or making extra contributions to your retirement accounts. Decide if any new life events – like a new family member – might impact your plans. Finally, write down your goals, including any specific amounts you want to save or pay off and the timelines for doing so. This will help keep you focused and your objectives achievable and realistic.
Review Your Insurance Plans
Part of a comprehensive financial health check includes having the right insurance in place. Review any home insurance, private health insurance or life insurance policies you already have and check if they still align with your needs. Check that the coverage you are paying for is sufficient for your current lifestyle, especially if you have new dependents. If you discover any gaps in your cover, making adjustments to your plans now can give you peace of mind and help protect your finances in the future.
Plan for Retirement
An often overlooked, but very important, area is retirement planning. Keeping track of your retirement accounts can be difficult, particularly if you changed a number of employers in a relatively short space of time. However, knowing where you are with your contributions is the only way to make sure you are on track for your retirement goals.
If you haven’t yet started saving for retirement, give serious thought to doing so in the new year. Making even small contributions to your pension can make a difference, especially if you begin early. Remember to check that your retirement plan aligns with your anticipated lifestyle and retirement timeline and adjust accordingly.
Check Your Credit Score and Debt Management
Having a higher credit score can help you get lower interest rates on loans and credit cards, so take some time to assess your credit file health. Look for ways to pay down persistent debt or consider consolidating high-interest debt if possible. If you can, increase regular payments on your debts or make extra ad hoc overpayments to reduce interest costs over time. Reviewing your most recent mortgage statement may also help you identify options for accelerating payments or refinancing to save money on interest.
Update Your Monthly Budget
A well-planned monthly budget keeps you on track throughout the year. After reviewing your income and spending, make any necessary adjustments to your budget that will help you achieve your goals. Create a budget that balances essential expenses, debt payments, savings contributions and some discretionary spending for a realistic, manageable approach. Then monitor your progress to make sure you stay on track.
Review and Set Up Financial Tracking
Finally, create a system for regularly tracking your finances. Whether it is a simple spreadsheet or a dedicated budgeting app, having a way to monitor your income, spending and savings each month helps you keep a close eye on your financial well-being. Many apps offer options for tracking bills, credit card payments and overall bank balances to help you stay organised and aware of your progress. Checking your budget and goals periodically can prevent surprises and allow for adjustments throughout the year.
Taking control of your finances with an annual review helps you stay on top of life’s changes and make steady progress towards financial security. This process doesn’t need to be complicated – just a straightforward look at your overall financial picture to ensure you are on track for the year ahead.
