It’s always a good idea to take a glance at your annual earnings and spending at the end of each year to guide you in making better choices during the next one! Here’s how to do a DIY year-end audit.
The year-end comes with a much-needed break and an even more anticipated holiday season. This allows us some time to reflect on the year that was, not only when it comes to meeting our professional and personal goals but financial goals as well. Deborah Fowles, former financial planning and budgeting expert for digital media giant Dotdash, is a firm believer in annual financial check- ups, saying that it is an opportunity to see how you have performed when it comes to managing your money over the last 12 months. Not only that, but it helps you to see if you are still on track (and, if you’re not, to recentre) to meet your solvency goals.
1 Assess your current, and upcoming, circumstances
Life tends to happen unexpectedly, and many events can require a budget overhaul. ‘Any life event, big or small, could impact your financial decisions
and savings goals,’ explains Deborah. ‘Have changes in your personal situation taken place in the last year or do you anticipate any major changes in the
near future? A job change, divorce, adding a baby to your family, retiring, buying a house, getting married, or moving can alter your income and
your lifestyle significantly.’ When doing a personal audit, consider things that may have, or are likely to, affect your financial stance and prepare yourself.
2 Set goals, and work towards them
After getting a better idea of where life may or may not be taking you, it’s important to evaluate your financial goals and whether you were able to meet them in 2021. ‘Ask yourself: Have you made progress on them this year? If not, where have you fallen short and why?’ suggests Deborah. Then you need to consider the new money milestones you’d like to work towards next year. ‘Establish clear goals and break down the practical steps you need to take monthly, quarterly and annually to reach them.’
3 Evaluate the progress of your savings
Not all savings goals can be met over the course of one, two or even five years. Sometimes these objectives can be long-term, and it’s important to stay on track or get ahead so as to not fall behind. During your audit, check if you are still on target and evaluate your timeline. Is the desired amount still attainable within the given time frame? If not, make the necessary adjustments and lower your expectations (and weekly or monthly contributions), until your bank balance is feeling more stable.
4 Draw up a New Year financial plan
It took living through a pandemic to learn that things can change dramatically over the course of a year. What may have been a reasonable goal when starting out this year may now be unmanageable if circumstances have since changed. But while we can’t predict the future, it is nevertheless important to have a plan. This will help us to establish goals and keep track of our progress. Decide on your short- and long-term goals and assess how long, and what is required on your part, to meet them.
5 Find different ways to save
Saving as much as you can but want to speed up the process to meet your money goals sooner? This requires a bit of homework, and possibly ingenuity, but it can make all the difference when it comes to boosting your bank balance. Doing a personal financial audit allows you to see where your money is going. If you notice that you are spending too much money in certain areas, such as shopping or entertainment, you can devise a better strategy for the upcoming year and make better decisions. This will also help you to think twice before you swipe!