30 Dec Perform a Year End Checklist to Save Money on These 5 Things Next Year
As another year comes to a close, you realize that you face the same unmet goals and the same financial struggles as last year. Repeating last year’s resolutions will not transform your life into the one you want to live.
Reaching financial goals does not require revolutionary solutions, but it does mean looking at your finances from a new perspective. Utilizing a year-end checklist is one way to recognize successes and identify how to turn your finances around in the upcoming year.
- Give Yourself a Report Card: In school, you received A’s and B’s for subjects you mastered, and D’s and F’s for courses you failed to comprehend. Think of your financial life in the same terms. Your report card will rank your financial wellbeing based on last year’s activity.
- Consider areas such as retirement savings, emergency fund balance, asset growth, budgeting skills, and credit management. Where did you find the most success, and what areas need the most work? Perhaps you judiciously put money into your 401K but were unable to stick to a budget. Strengthening financial weakness can dramatically improve your finances.
- Understand Your Income Streams: Today, household income often comes from multiple revenue streams. You might have a W-2 from your job(s), a 1099 from gigs like driving for Uber, and commissions from a website, blog, or consulting work.
- Next, compare the income from each source with the hours required to achieve those earnings. For instance, you might discover that the Uber job only averaged $5 an hour, where renting your home while on vacation through Airbnb netted $2,000 with little out of pocket costs. Understanding what it takes to earn more will assist in identifying opportunities to increase earnings.
- Scrutinize Spending: Your current lifestyle likely matches or exceeds income. Spending all you earn, without saving a little from every paycheck leaves you in financial jeopardy. An unexpected bill could put you in a financial bind and result in using credit cards to cover shortfalls.
- To get spending under control, you must first understand where your money goes. One effective strategy is to divide spending into fixed and variable costs. A mortgage or car payment typically remains the same each month, where food, gas, utilities, and entertainment vary.
- Start your search for savings in variable costs, because you have more control over those expenses. Find places to cut back or eliminate spending, freeing up money to build an emergency fund, pay off debt, or contribute to long-term financial goals.
- Take Inventory: Your net worth is critical to financial planning. A review of assets and debts will clarify what you own and what you owe. Then chart ways to grow assets and reduce debts. Debt reduction starts with understanding the cost of debt. What interest rate do you pay and how much of your payment reduces the principal versus covering interest charges. High-interest rates on credit card debt come with high carrying costs and can prevent you from building wealth.
- Set Financial Goals: Use the financial report card to identify your financial areas of focus. Save time by streamlining income sources and utilizing your time more efficiently. Reduce financial waste through changes to spending habits and know what your debt costs you, to more efficiently eliminate credit card bills.
The above analysis gives you the tools to set realistic and achievable financial goals that will have the biggest impact on your financial strategy.
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