The end of the year is a good time to step back and do an analysis of your overall financial health and your financial plan. How has your financial picture changed this past year while erasing debt? At the end of the year, in the last week or last few days of the year, review your financial picture to see where you are and evaluate how you are doing.
Take a look over your monthly budgets for the past year. Have they been right on target? Did you miss any big expense that should have been anticipated? Figure out what could have been improved and then make an effort to correct that going forward with the following year’s budget.
Analyze your spending. Did you manage to keep your spending under control? Were there areas where you over-spent and were surprised that you did? What unexpected expenses came up during the year that caught you off guard and unprepared to effectively deal with them? Identify areas of spending that could use improvement and make a plan to adjust differently for those in the new year.
Also identify areas where your spending patterns were well in control. Identify whether these good areas of spending were due to planning in advance or were accidental. If accidental, determine ways to continue these spending patterns on purpose with better planning.
Look at what you saved over the past year. Was it more or less than you expected? Were you surprised by this number? Come up with a savings goal for the following year and plan for this savings by incorporating it into your budget. This may mean setting goals to open a new savings account or a new Money Market Account at your bank. It may require that you increase your 401k contributions at work. Or maybe you have to start it. Set some goals and get going on saving more in the new year.
4. Net Worth
Best of all, review how your net worth has changed over the past year. Has your net worth increased? Hopefully it has. Has it increased dramatically? Meaning has it gone up a lot more than you expected? If so, congratulations, you are making great progress. If it has gone down, then try to figure out why and make corrections where appropriate. Use the analysis of your net worth as a gauge on how well you are doing and to help grade the progress you have made over the last year.
So at the end of the year, analyze how your financial picture has changed over the past year. Hopefully for the better. Erase debt and build wealth.