Before you can run off to look at the personal finance improvements you can start in 2014, you need to go through a financial review first. This will help you understand where your finances currently stand and how far or near you are from your life goals.
Reviewing your financial standing goes beyond looking at your current balance in your bank account. It also does not only mean totalling your debt obligations. If you have gone through some tough money problems in 2013, you need to go back to analyze them. You want to make sure that the lessons have been learned and that you will not go through that again. You also want to look at your successes to see how you can replicate them – or possibly make the results even better than before. Lastly, you want to make sure that they goals you have not yet accomplished will be pursued and never forgotten as you go through next year.
What part of your finances should you review
The details of your financial review will actually depend on your current situation. You may have a lot of categories to look into or you may have a few. It all depends on how your finances came out from last year. Did it improve or are you in a worse financial situation than before?
To help you get started, here are the 4 important aspects of your financial life that needs to be reviewed this new year.
The first aspect is your income. You want to review and compare how your income improved or worsened in 2013. Was it enough to sustain you and your family? Did it give you a comfortable life or did it leave you wanting more? If it is the latter you know that you have to come up with a plan to get a higher income. It can be done by asking for a raise or looking at other sources of income. You can start your own business or you can get a second job. It all depends on how much you want to increase your income to have a better cash inflow in 2014.
The next part of your financial review involves your expenses. Review where your money went to last year. Although you may have plans to grow your income, you also have to make sure that your expenses will only be spent on things that you planned. In reviewing last year’s expenses, did your money go to where you intended them to? Or were they mostly spent on things that, looking back, are actually unnecessary? You want to make sure that the wrong expenses will not be repeated so you can put them to a better place. You also want to review if there are goals that you need to spend on in the new year. You want to make sure that you will have adequate funds for that.
The third financial review that you will do is on your debts. Do you still have debts carried over to this coming year? If yes, how much is left? You may want to ensure that you will be able to pay down a huge amount on your debts this 2014. In a report from the New York Federal Reserve, they showed that the household debt in the country continues to rise in quarter 3 of 2013. The released report last November 14, 2013 showed that the household debt increased by $127 billion from Q2 to Q3. It currently stands at $11.8 trillion. The breakdown are as follows:
Mortgage: $56 billion
Student loans: $33 billion
Auto loans: $31 billion
Credit card debt: $4 billion
If you have most of these loans, you may want to seriously consider lowering your balance. Think of a debt relief program that you can enrol into or qualify for. That should help give you a step by step process in getting out of your debt situation. And while you are at it, make sure that you will stay out of debt as much as possible. That will keep you from having to take on more debt by the end of the year.
Lastly, you want to review where you are in your savings. If you have set saving goals in 2013, you may want to analyze how far you have come since you have set the goal. Is there a way for you to fast track your progress? You should also take a look at your savings account to see if your emergency fund is still intact. With the inflation rate and rising cost of living, do you still have enough in case a financial crisis will strike in 2014? You want to be ready for any possibility.
Personal finance resolutions to take you to the next level in 2014
When you have done your financial review, you more or less have an idea about the steps that you will take to reach your goals. Here are some tips that we have for you to strengthen your personal finances in the coming year.
Start investing overseas. While a lot of countries are still unstable, there are those who are developing or recovering and they may be great investment options in 2014. If you do not trust the recovery in our nation, put a portion of your savings where it will grow in another country. Barrons.com published an article from JPMorgan’s Chief Global Strategist, David Kelly that included this investment strategy for the new year. He mentioned that 52% of the global stock market are held by foreign equities but US investors only put 18% of their money in non-US companies. According to the article, some of the companies will even surpass the growth of most US investments so it may be a good time to start thinking about putting your money overseas. At the very least, that will add diversity in your portfolio.
Set a new financial goal. Try to come up with a new financial goal that will leave you with a higher net worth by the end of 2014. It can be through investing or the acquisition of an asset. It can also be done by learning a new skill that will allow you to ask for a raise. These are all options for you to increase your income.
Identify the habits you need to start improving. When you did your financial review, you should have gone through a couple of bad habits that got you in come compromising positions in 2013. You may want to take note of these so you can start removing them. Not only that, take note of the habits that gave you some form of success. By replicating the good habits and eliminating the bad ones, you will should be able to build a more secure financial future for yourself.
This financial review that you will go through will enable you to move forward from the mistakes and successes of 2013. We all go through experiences for a reason. By reviewing what happened in the past, you get to ensure that you can implement the lessons learned. If not, there is a chance that you will repeat what you did. You may think that you are still in good shape when in fact, you have been slowly spiraling down another financial crisis.