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Ready for a Fresh Financial Start to the New Year?

It may not sound like fun, but taking stock of where you are with your finances, what went wrong and right this year as well as what you want to accomplish in the year to come are all essential to being successful with your money.

Today's episode will teach you how to get your finances in order before the end of the year.

Action Task

Your action task this week is to simply schedule your annual review.

You don't have to do it yet, but add it to your schedule so you can make sure it gets done.

Resources

Posts to help you with budgeting:

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Below is the transcript from today's show. Or you can download the full transcript as a PDF.

With all the increased expenses the holidays bring, it's always a good idea to do an end of year review so you can evaluate how things went, where you did well, where you can improve, and where you want to focus moving forward. In today's episode, I'm going to give you 10 simple steps to complete an annual financial review.

Welcome to the Go From Broke podcast where you'll learn how to take control of your money so you can stress less and save more. If you're tired of living paycheck to paycheck or constantly wondering where your money is going, you're in the right place. This podcast is all about giving you actionable tips and advice so you can get started improving your finances today.

It's almost a new year, and if you're like most people getting your finances in order is toward the top of your new year's resolutions list.

But before you can succeed in improving your financial situation, you need to know exactly where you stand today.

So here are 10 steps to do an annual financial review and get a better manage over your money as you move into the new year.

So step one, set your goals.

Did you know, you're 42% more likely to achieve your goals simply by writing them down?

The first step of your financial review should be to set some goals for your money.

Whether you're saving for retirement, for your kid's college education, or just trying to pay off your credit cards, setting goals will help you stay focused and motivated.

Take the time to think about what you really want for your family and your finances this year, and set some goals around that desire.

Step two, review your debt and savings.

Now that you've got your goals in place, it's time to assess where you currently stand.

Part of your annual financial review should be getting clear on exactly what money you have and where you're spending it. So go check your accounts and see how much savings you've got and how much debt you have.

Record your numbers to make it easier for when you fill out your budget.

Which is step three, make a budget.

Budgets get a bad reputation for being restrictive and impossible to keep. But having a plan for your money is essential if you want to take control of your finances.

A budget will help you prioritize your spending and your savings goals, and keep you aware of where you're spending your money.

I'll put some links in the show notes for you if you want some extra help or tips on how to make a budget.

Step four, reassess your bills.

As you create your budget, you may notice there are some bills that may seem higher than they should, or maybe some expenses you have that don't align with your values anymore. Reassess your expenses and take the steps to negotiate better rates or cancel the unneeded services outright.

And as a pro tip, set up an automatic transfer to your savings account that's equivalent to the amount of any bills you reduce.

For example, if you cut your cable bill by $50. Transfer $50 every month into savings. This will help you save money instead of just spending it on something else.

Step five, prepare for the unexpected and the expected.

Unexpected expenses can quickly derail even the most experienced and disciplined budgeter. Making an annual review of your spending will help you plan in advance for any expenses that may have caught you by surprise in the past. Things like your car registration or your property taxes.

Review your expenses for the past year, taking special note of the annual and semi-annual recurring bills that might take you by surprise.

Then incorporate them into your budget by doing the following. Divide the amount you'll owe by the number of months you have left until the bill is due. Then save that smaller amount each month. Then when the bill comes, you can pay it in full.

Not all unexpected expenses are as predictable as semi recurring ones. But you can still set up sinking funds to help you plan for the truly unexpected.

For example, you should be able to estimate your car insurance costs and budget for those monthly, but car repairs are a little bit more of an unknown.

While you may not know exactly how much future car repairs are gonna cost, you can still save money for them every month so you'll at least have some sort of buffer when repairs are inevitably needed.

Step six, check your credit.

Even if you're not a fan of credit cards, it's important to check your credit report every year. Everything from job offers to rental agreements can be impacted by your credit worthiness. As with most aspects of your finances, knowing where you stand is the foundation to taking control of your money.

You can get a free annual credit report at annualcreditreport.com. And you can monitor your credit score with Credit Karma. The link to that as in the show notes.

Look for any errors that may be affecting your credit score or any new accounts you didn't open that may be a sign of identity theft.

Step seven, review your retirement savings and your investment accounts.

Let me just state upfront that I am not an expert on tax law. So make sure you consult a financial advisor or an accountant for specific advice and guidance that's tailored to your particular situation.

But with that said there are some generic best practices that you can follow as part of your end of year review.

If you've got a 401k, a Roth IRA or any other retirement savings and investment plans, it's a good idea to review them each year.

Since many retirement plans are offered through employers, it's often a set it and forget it type of account.

While you may not be interested in managing your own retirement accounts, you should still learn enough to understand your investment strategy and be aware of how your investment portfolio is being managed.

Make sure you're comfortable with your asset allocation and any management fees you're paying. Depending on your financial situation and your savings timeframe, a seemingly reasonable 1% fee could actually end up costing you over $500,000.

For investments you manage yourself, double check your portfolio is diversified to suit your own risk tolerance and then make any adjustments as necessary.

You may also want to look for tax advantages, like harvesting losses to reduce your capital gains tax before the end of the year. But like I said, talk to an accountant or a financial advisor before you do any of those things.

Step eight, check and or update your insurance coverages.

When's the last time you reviewed your insurance policies?

If you're like me, you view reading insurance coverage documents as probably the most painful part of personal finance.

But shopping around for better rates and calling your local agent to ask for any discounts is actually a really easy way to lower your expenses while still making sure you've got the coverage you need.

It's also a good idea to review your coverage to make sure you're not paying for things you don't need.

For example, you may be paying for car rental coverage or roadside assistance through your insurance. When your credit card offers the same benefits for free.

Step nine, optimize your taxes.

Again, you'll want to consult with an accountant for official tax planning, but in general, here's some areas to look to for some tax optimization.

Itemizing your deductions, donating to charity, contributing to your retirement and college savings plans, selling off stocks that have lost money to offset any capital gains you might have, and contributing to health related savings or spending accounts.

Again, talking to an accountant who can review your specific situation will help you determine the tax implications of your financial decisions. But there are some things you can do to decrease your tax bill and increase the amount of money you're able to save.

Step 10 plan for the worst case scenario.

No one likes to think about disability or death, but it's important for your family's financial future that you've got things in place if the worst case scenario becomes a reality. Here's some steps you can take today to prepare.

First review your health insurance and disability insurance policy benefits.

Second, save up six months of your income and emergency fund.

Third, get a life insurance policy and make sure your coverage is adequate.

Fourth, have a will in place that ensures your beneficiaries are taken care of.

And fifth, get your documents in order for any end of life decisions.

Planning for the worst is never a fun prospect, but trust me, if the worst does happen, having to search for and sort through someone else's papers and accounts is the last thing you want to deal with on top of everything else that's going to be going on.

So those are your 10 steps to completing a financial review. Going into a new year is the perfect time to do a financial checkup and make sure your financial plan actually aligns with their goals and values.

For a lot of us. If it's not in our calendar, it won't get done. So your action task this week is to open up your calendar, pick a time that you can work on this, and actually schedule your annual review.

Having a clear picture of your finances will help ensure that you start the new year strong and give you a headstart in reaching your financial goals.

I hope this episode was helpful. If so, I'd love it if you could leave a rating and review.

And don't forget to hit subscribe so you never miss an episode.

As always take action and make it a great day.