Now that 2015 is closing out, it is a good time to undertake a spring cleaning of your financial house. Doing so will help you improve your financial health in the New Year, possibly save you money on taxes and give you a revised and realistic financial plan for the coming year. Here are a few brief tips to get you started.
- Budget review
Gather all your expenditures and income receipts, calculate everything and compare to your budget. If you use Quicken, then print out an income and expense report. Make sure it calculates by categories. This will save you lots of time.
- Did your income exceed expectations?
- Did you spend more than you anticipated in certain categories or across all categories?
- Were you able to meet your savings goals? If no, why not? Was it due to lack of sufficient income or uncontrolled spending? Maybe 2016 would be a good time to put into place an automated savings feature where the amount you set is automatically deducted from your earnings.
- How about your debt reduction goals? Did you take on new debt?
- Did you notice more outstanding medical expenses than you anticipated? Do you think this trend will continue? If so, then you should adjust your out-of-pocket medical expenses category in your budget and perhaps purchase additional insurance.
With the information in hand, you can now adjust your budget for 2016. If you earned more money than you anticipated, perhaps you can increase your saving goals, or put more toward paying off bills, such as loans, credit cards, etc.
The main point is to realistically evaluate how well you stuck to your budget and financial goals and to set a new plan accordingly. Information you gather will be useful for your tax preparations too, and for setting your cash flow requirements for the coming year.
- Tax return
Sooner is better than later, so with the financial information you gathered in the process of conducting your budget review, you now have vital information that you will need for your tax return, such as income, medical expenses, donations, business expenses, and anything else that will help you save money on your income taxes. Certain retirement accounts allow investments through the month of January. Check the status of your retirement portfolio to determine if you need to take advantage of any late investments to reduce your tax burden.
Review your investment portfolio: did you meet your investment goals? Is your investment strategy still relevant? How are your stocks performing? Do you want to let go of under-performing stocks and focus more on what is working? Is this the year for a more risky investment strategy?
- Credit cards
Gather all your credit card statements and
- Assess your payment schedule—on time? Always late?
- Paying the minimum, more than minimum, not even the minimum?
- What interest rate is being charged on each card? Perhaps it makes more sense to use only the card(s) with a lower interest rate and keep the others in reserve.
- Will you be able to manage the monthly payments on your credit cards according to your new 2016 budget?
- Do you need to consolidate either by transferring balances to a new credit card or by taking out a personal consolidation loan, such as from a peer to peer lender?
- The future
Armed with all of your assessments you can now make plans for the future. Maybe 2016 is the year to buy your home, or renovate your current home. What are your options for buying? Do you need a mortgage? Perhaps a smaller home purchase loan from a marketplace lender is all you need to cover the extraneous expenses involved with buying a home. Maybe 2016 is the year to take that extended vacation to all those exotic places you have been dreaming about. Or to start a home-based business. What about college savings for the kids? How many more years before they head off to college? Will you have enough for tuition?
Take the time now, while everyone is still on holiday mode and between all your favorite January activities, to set priorities and ensure yourself a financially healthy 2016.