Published On: Sun, Feb 14th, 2016

How to do an Annual Financial Check-up

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It’s time for a financial check-up. Doing an annual financial check-up is crucial if you want to improve your financial success. Just like your health, car and other aspects of your life, your finances should be thoroughly assessed once per year at minimum.

Having a financial check-up is a great way to see how far you’ve come and what you may need to work on in the future. Your plans and motivation may change over time, so it’s important to rework your goals and develop new strategies to implement.

An annual check-up can be simple and doesn’t have to take up too much of your time. Here are four things you should do in order to have a successful financial check-up!

Financial Check-Up Evaluation and Goal Setting

Setting goals is the first task. Take a look at the goals you set last year. Ask why you did or did not reach them. Determine what you want to achieve this year. Prioritize those goals so you can pinpoint your main focus for the year.

Evaluate Your Progress

If you tracked your progress over the past 12 months, analyze your accomplishments and the milestones you hit in order to get closer to your goal. You can check bank statements and payment history documents to analyze debits and credits.

Did you pay off a lot of debt last year? Did you save or invest more? Once you’ve evaluated the progress you’ve made, you’ll have a clearer picture of what your strengths and weaknesses have been and how you should approach them moving forward.

Develop New Strategies

Now that you know what did and didn’t work for you, it will be easier to develop new strategies. Has your situation changed in any way that can alter your approach on improving your finances this year? Did you move or get a new house? Did you add a new member to your family? Has your credit score changed?

Determine exactly what you will do to pay off debt, control your spending and save and invest. Make sure you set your savings contributions up with an automatic withdrawal to ensure that you stay on track with your goal.

Other strategies you can implement this year include transitioning to an all cash budget. If you have debt, you can focus on either the avalanche or the snowball methods.

You may want to take a closer look at how you can protect your assets by getting insurance or changing your current coverage if it’s taking too big of a bite out of your paycheck.

Take your time when developing new strategies. This will ensure you’ll be able to stick with them for the next 12 months.

Prepare for the Unexpected

Your emergency fund is an important part of your finances. It should be reviewed regularly. It’s best to maintain a healthy emergency fund. This means having enough to cover your monthly expenses for a specific period of time. Decide what that length of time should be for your particular situation. Many people go with 6 months. You might want to move where you store your emergency fund this year so you can access it easier or earn more interest on the balance.

Your annual financial check-up is also a good time to check on things like your will or estate plan. See if you need to make any changes. These things aren’t fun but it’s necessary. Keeping good plans in place means you’ll be fully prepared for the unexpected.

Work on Your Income Taxes

Doing taxes can be a tedious process. You can get a head start by preparing early, minimizing deductions and exploring tax credit opportunities.

You may want to create a list of deductions. Locate all the paperwork you need in order to file and organize/make copies of all your receipts.

Doing all these things will help tax time be a lot more pleasant.

What will you focus on during your financial check-up?

Source: Young Finances


About the Author

- LaTisha Styles is a motivational speaker, millennial money expert, and spokesperson specializing in simple finance for millennials. LaTisha is the producer and host of Young Finances TV, a weekly series featuring funny, insightful videos on the basics of personal finance. LaTisha has been quoted in Forbes and Mainstreet, featured in The Economist, and mentioned in US News as a top personal finance expert to follow on Twitter. You can follow LaTisha on Twitter for daily millennial money tips to budget, invest and achieve success!

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Did you know?

African Americans are significantly more likely to have some type of debt (94%) compared with the general population (82%). Credit card debt, student loan debt, and personal loans are all significantly higher in the African American community.

Source: Prudential’s 2013 "African American Financial Experience" study