Do you need a financial check-up as the year is about to come to a close?
The short answer is yes – you need one to make sure that you are ending the year right and that you get to start strong for the coming new year. The past years have been tough with the health crisis impacting the economy as well. It is only now that businesses and other companies are starting to get back up on their feet.
Of course, this also means that consumers are starting to recover as well. Starting with either getting regular work hours again or finding a new job. Once your finances and pay become regular again, you can start to pick up your plans from before the pandemic or start new ones. The important thing is that you now have
Why do you need to go over your finances?
You need to go over your finances to make sure that you are still on track with your goals. It would be a lot harder to pivot back and stay on course when you realize you are far off your goals. But that is just one of the reasons you need to go over your finances. Here are a few more things to know about why you need a financial check-up before the year ends.
Stay ahead of identity theft
Hackers and scrupulous criminals do not choose a time or place to attack your finances. But with the Christmas holiday just around the corner, they could be taking advantage and trying to gain access to your finances. This is because a lot more people will be shopping online and spending on holiday gifts for family and friends.
Going over your finances can help you catch questionable transactions in your finances before they can inflict big damage. Normally, they would try to transact with a small amount first to check if it goes through before charging huge transactions. Getting ahead of this helps you guard your finances and your money intact.
Stop lifestyle creep
According to CNBC, lifestyle creep is when your income is unable to keep up with an increase in your lifestyle expenses. This happens when you start to add incremental expenses to your budget. It can be choosing to go for takeout more often because you just don’t feel like cooking every night. You might also be going out to buy clothes every week because you started going back to work.
These and some other decisions you have made in the past might not seem like big deals but you may not realize that they all add up to a significant amount each month. And a financial check-up can help you see that. In fact, you might only be able to identify these spending patterns when you perform a check-up on your finances. Once you see them, it would be a good idea to try and cross them out or at least, remove them gradually from your budget.
Check on your goals
As mentioned earlier, one of the primary goals of a financial check-up is to help you cover and reassess your goals. As the year is about to come to a close, it would be a good idea to see if you are still on track with your plans and goals in life. Especially for those that you planned out for the whole year. This will help you make the necessary adjustments to make sure you hit your targets.
Start a new goal
As you look at and review your finances for the year and look at your goals, it would also be a good opportunity to identify new financial targets you can plan out for the coming new year. Looking at your finances gives you a pretty good idea of you can start focusing on new goals. In a way, it helps give you some sense of purpose and direction for the next 12 months.
How to conduct a financial check-up before the year ends?
Reviewing your finances for the year means going over your budget, looking at all your accounts, streamlining your goals, and even getting a credit report. They might seem to be a lot of work but they will help you have a better sense of your finances coming into the new year. Let’s take a look and dive into each item.
Go over your household budget
One of the most useful financial tools at your disposal is your household budget. There are times when you completely forget about it, especially toward the end of the year. But looking at your budget will give you the chance to understand your income and expenses situation. It will show you if you have been effectively managing your finances or spending more than your income can handle.
If you are sticking to your budget, there is a good chance that you are on track with your current financial goals. You are using only what you can afford to spend and keeping aside extra money for future needs. Also, looking at your budget gives you the chance to realign some expenses especially as the Christmas holiday season approaches. It could be a more expensive end of the year so moving your expenses around can free up some money.
Check your accounts
If you are not regularly checking your accounts, now is a good time to do so. Conducting a financial check-up is never complete without looking at and reviewing your accounts. This does not only mean opening your bank statement and trying to balance them. You need to look at your investments, retirement account, and even expenses as well.
It is important to regularly check your savings and investment accounts to make sure that they are still intact. For your investments, it is a good idea to ensure they are growing according to your projections and needs. Your retirement account needs constant checking as well. Especially since this is a favorite target for hackers simply because people rarely check on them.
You also need to look at and revisit your payments and expenses. There are times when you can simply call up your lender to check if there is a way to lower your interest payment. This normally gets a favorable response when you have been paying on time or if your credit score has improved. Bottomline, check your accounts to make sure everything is in order and if you can lower down payments as well.
Realign your long and short-term goals
Looking at your finances before the year ends helps you identify progress and even shortcomings when it comes to your goals. For one thing, your long-term goals should be supported by your short-term targets. So keep this in mind and make sure that these two are working together and pushing you towards your goals.
There are times though when you need to make adjustments over the course of the year, especially with short-term goals. Now is a good time to take a look at that and pivot back if possible to your original target. If it is not possible to do it quickly, find a way to slowly get back on track. This will help you reach your long-term targets faster.
Get a credit report
It also helps to get a copy of your credit report before the year ends. For one thing, this lists down your financial activity. Much like your credit card statement, your credit report will give you an overview of your payments. If you notice anything questionable, call your lender immediately to clear it up. This helps you stay ahead of online hacking and theft. And the FTC reminds consumers that they can get a free copy of their report once every 12 months.
More importantly, your credit report will give you an idea about your credit score. Remember that you get many benefits from a high credit score like lower interest rates on loans. This can mean huge savings down the line.
Conducting a financial check-up before the year ends can help you learn from your current situation and improve your finances for the coming new year.