One of the best things you can do for yourself as the year winds down is to perform a financial year-in-review. Understanding your good moves, as well as identifying your mistakes, can be a great way to improve the way you manage money going forward.
Look at Your Spending for the Year
The first thing to do is look at your spending for the year. Where did your money go? When you look at how you spent your money, pay attention to whether or not you spent according to your values. Are you satisfied with the way you used your money? Be honest, identifying things you regret now. This will help you be more conscientious about the way you spend money in the future.
As you look at your spending, also consider how you handled unexpected expenses. When my ex-husband and I separated, I had all sorts of unexpected expenses. This included moving across the country and taking care of other costs. I ended up dipping into my emergency assets, as well as getting a personal loan, since I didn’t want to deplete my assets too far as I prepared for a fresh start.
Figure out what you could have done differently if you ended up with unexpected expenses and assess why you had to dip into your savings or turn to debt in order to make ends meet. Going forward, I continued to rebuild my long-term emergency savings and I worked on paying down my personal loan the next year. I had a plan, and it was because I took the time to do a review of my assets.
Consider Your Income
Consider Your IncomeTurn to income once you are done evaluating spending. Did you stay within your means? Or did you outstrip your income with your spending? Don’t just look at the numbers, though. Consider where the earnings come from too. Do you have diverse sources of income? Do you make an effort to earn more money when you can?
Consider ways to make more money if you don’t make as much as you would like. Can you start a side hustle? Get a second job? Sell some things that you don’t use anymore? If you weren’t happy with your income in the past year, think about some of the ways you can increase it during the coming year.
Look Back on Your Financial Goals
Now is the time to think about how close you came to achieving the financial goals you made at the beginning of the year. Make sure you celebrate any progress you made even if you didn’t accomplish everything on your list. You can make a course correction for the coming year, learn from your mistakes and reconsider your more unrealistic goals.
It’s important to review this aspect of your financial planning, since it can provide you with insight into the way you handle your money and what money means to you. Getting clear on these realities can help you fix mistakes you have made, as well as ensure that you will keep moving forward in the coming year. You don’t have to be financial perfect this year or even next year. What matters is that you review your past and learn from it.