Happy December! With the holiday season upon us, I expect most people are preoccupied with visions of dancing sugar plums and Christmas stockings. I know I certainly am! But if you find a bit of quiet time during all the rush, I'd encourage you to spend it doing something truly jolly: conducting your own year-end financial review.
Alright, maybe that's not exactly jolly. But it is important. A financial review is a great way to determine exactly how your year went, so you know what mistakes to avoid next year, and which successes to replicate. It's a chance to take stock: are your finances in the shape you want them to be? Did you accomplish the things you wanted to this year? Have you moved closer to your goals, or farther away?
(Or, to put it this way, have your finances been naughty or nice?)
Of course, you can do a review like this any time ... but there's something about the end-of-the-year that really brings clarity. The best thing is, you can do the review yourself. Here's how I would do it:
1. Write down the following questions on a piece of paper:
- What were the best things that happened to me this year?
- What were the worst things?
- How much did I set aside in savings this year?
- How much did I invest and how did my investments do?
- Did I take on any new debt this year?
- Did I pay my taxes on time or did I have to apply for an extension?
- Have there been any changes in my life that could affect my will or insurance needs? (Think new kids/grandkids, illness concerns, new property or other possessions, etc.)
- Do I have a better idea about when and how I can retire, or is the situation foggier than ever? Did I give it any thought?
- Did I spend the year doing enough of what I wanted to do, or only the things I had to do?
2. Think about these questions for a little bit. Then write down the answers.
3. After you have the answers, study them to determine if they necessitate any financial changes or decisions for the next year. For example:
- Why did the best things happen to you? Were they the result of any particular financial decision? If so, can you replicate that decision?
- Why did the worst things happen? If you did something different with your money, could one or more of those things have been avoided?
- Did you put more into savings this year, or spend more in debt? If so, can that possibly be reversed next year?
- Are you satisfied with the way your investments have performed, or is a change in order?
And so on. You get the idea. After you've completed this exercise, you'll have the beginnings of a plan in place for next year. A plan to make your finances healthier. A plan to make your family more secure. A plan to spend more time doing what you want to do instead of solely what you have to do. A plan to make next year the best year ever.
Pretty insightful, that end-of-year-review turned out to be. And definitely worth the few minutes it took to conduct it.
If you have any questions, or need help with anything the review uncovered, feel free to let me know. I'd be happy to talk with you and do what I can.
In the meantime, happy December! Happy reviewing!