It is a closing time during the year-end for a business, its settlement of accounts, and for individuals, it is about the achievement of personal goals. The year-end holiday season is the best time to analyze your business achievements and goals. With the year-end festivities, there will be no time and money left with you for the beginning of the year. Fiscal decisions which are taken during the year-end often have a lot to contribute to the financial status in the following year. It is a great time to adjust and begin the new year.
Before the year ends here is the list of best financial practices that you must follow.
- Budget analysis
- Do a financial analysis
- Revise your financial goals
- Remodel financial map
- Revise your investments
1. Budget analysis
The key to good financial planning lies in budgeting. For those who don’t have a budget yet, now is the best time to seriously consider budgeting! Once you set up a budget, you’re off to a good start. For starters, here’s everything you need to know about the dos and don’ts of budgeting.
For those with a budget in place, now is the time to review it before the year ends. Take a closer look at the current state of your finances and figure out if it has been difficult for you to stick to your budget. Were there too many unexpected expenses that made you overstep your budget? Were you able to save enough even after paying for all your expenses? Did your fixed expenses, such as your house rent, increase? Has a new loan or long-term expenditure been added to your kitty?
Your new budget should incorporate all the above factors. Design it in a way to help you boost your savings. If you’ve had a financial goal for this year, such as paying off your outstanding Credit Card balance, emerging debt-free, or taking a Personal Loan to finance your business, December is the perfect time for you to access how far you’ve come in terms of achieving these goals. Based on the results, you can re-align your financial goals and get a head start on your fiscal fitness for the next year.
2. Do a Financial analysis
The best way to move forward is by learning from mistakes made in the past. Before mapping out financial goals for the next year, assess how this year went. The insights you derive will serve as pointers for drafting financial goals for next year.
Check to see if your income rose this year. Calculate your average monthly expenses. Evaluate how much debt you still have to pay off and take stock of whether your overall financial health was sound this year. Have you been able to prioritize contributions towards an emergency fund with at least 4-6 months’ worth of funds?
A financial analysis is a must if you’ve already paid off your Credit Card dues or added any new loans and investments to your finances. This audit will help you figure out exactly where you stand and determine which areas you might need to revisit in the next year. This last-minute financial audit is a great way to put your finances back on track in the next year. Look back on your finances and calculate any surplus capital you might be left with at the year-end. The excess sum can be directed to your savings, retirement, and investment portfolios.
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3. Revise your financial goals
When your circumstances change due to life events (such as losing or getting a job, earning more money, having a child, having a health emergency, etc.), review your new situation with your goals.
If you come up short of your savings goal each week, that doesn’t mean you should stop saving. You may just need to adjust your goal.
4. Revise your financial map
Don’t be afraid to revisit your current financial planning and shake things up. Restructure your finances to figure out what might work better for your personal finance.
Making drastic changes to your finances can prove intimidating. Hence, once you have reviewed your finances and figured out the changes you need to incorporate the next year, spend the month of December making these small changes.
By taking small steps in terms of revising your financial habits before the year ends will not only get your finances back in shape more efficiently, but it will also give you enough time to see if these changes work in your favor. Hence, December is also your time to test out any new monetary practices that you might have in mind for the new year!
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5. Revise your investments
The end of the year is the perfect time to rebalance your investments in terms of the performance of your assets. Review your existing investment strategy to gauge the performance of your assets and re-align your investments in the next year accordingly.
If you don’t already have a well-diversified investment portfolio with several investments branched out across different avenues, now is a good time to research investments for the coming year.
If you’re already an investor, the first step would be to determine the existing asset allocation of your current investment portfolio. By evaluating and re-balancing your financial portfolio, you’ll get that perfect combination of stocks, bonds, and other asset classes for your investment portfolio.
Before revisiting your investment strategy, it would be wise to conduct a fresh risk vs. return analysis of your investments for the new year and probably seek advice from an investment consultant.
Take away
As the year draws to an end and the festive fervor takes over, it’s time to take stock of how your financial health has been this year, reflect on your successes, and take a look at what can be improved next year. This is also a great time to evaluate your savings and retirement funds and see if you need to make any changes to your retirement planning.
With these tips in your kitty, you’ll surely be able to kick-start the new year on the right financial note! If you’re on the lookout for a Personal Loan or a Credit Card to start off the new year with the right financial products, we’ve got you covered!
About the author
Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.
