As 2021 is coming to an end, analysing the state of your finances at this time is the best way to determine what worked and what might need adjustments in the upcoming year. It also reveals the things that are costing you more money than necessary. However, before you start the process, you need to understand what to lookout for – both big and small – when it comes to end of year financial planning.
Step 1: Review overall budget
Assessing on your current budget can help to determine how you spent your money throughout the year, and whether you were able to generate more revenue rather than spendings. By doing so, it can also help you to decide which area you are overspending and find ways to save. For example, all your subscriptions should be fully utilised, including things like cable, land lines and entertainment (such as streaming services, magazine subscriptions, etc.). Things that haven’t been valuable in the past few months should be cut off so money can be put for better use.
Step 2: Get serious about debt
End of the year is the perfect time to pay off your debts before welcoming the new year and to do that, you need a solid plan, whether it’s student & car loans, credit cards or something else altogether. As you will also be reviewing your budget – including cancelling subscriptions that you don’t use and cut back on different items that aren’t important anymore – you can work on dividing up tat surplus and pay off the high-interest debts first before the lower ones.
Step 3: Check your savings
Did you stick to your savings goals for the year? If you didn’t, why? Is there room for improvement? Did anything change that could let you save more? These are a few questions you can ask after going over your budget. It is good to have an automated savings plan in place every year. These days automatic payments for bank accounts, brokerage accounts, and retirement accounts can be set up easily through our fingertips.
Step 4: Make necessary policy updates to reflect your life changes
Whether you bought a new house, had your first child, or started a small business, there surely were some changes to your life over the past few years that require somewhat little financial management. This includes things like checking on your real estate plan and insurance policies. If there are any changes to be made to your tax withholdings, this would be a good time to check on it. For example, if you find that you find that you owe money every year, increasing your withholdings can help avoid this issue in the future.
Step 5: Request a free copy of credit report and check your score
Before going into the new year, two of the best things to do financially is getting a better understanding of where you stand with your credit score, as well as to obtain a free copy of your credit report to check for any fraudulent activity. If your credit score is in the fair or bad range, you should plan in the following year to set up automatic payments so that you will always pay on time. Doing so, you will decrease how much debt you carry and increase your credit limit.
If any of the strategies above seem complicated or confusing, or maybe you want someone to walk you through the process, then consider a financial advisor. The advisors at Finsource Credit provides professional advice for you 24/7. If you need any sort of immediate financial solutions, you can always look for Finsource Credit. Contact us today to learn more about how we can be of assistance to your financing needs.
: 03-2712 4333