6 essential personal finance checks you must do before the year ends

As the year comes to a close, it’s an excellent opportunity to assess your financial well-being. Certainly, it’s crucial to consistently monitor your financial well-being. However, examining your investment portfolio specifically now establishes the groundwork for shaping financial decisions in the upcoming year.

A comprehensive examination of your finances is vital for recognising both strengths and weaknesses in your financial situation. Through a detailed analysis of your income, expenses, debts, and assets, you can acquire valuable insights into your financial well-being and make informed decisions about your future. It begins by assessing your personal financial health.

As you diligently gather your financial documents and assess your investment portfolio to ensure you’re on course to achieve your financial objectives, now is an opportune moment to examine key financial factors before setting your goals for the upcoming year.

Reviewing your income and expenses

Examining your cash flow is essential to obtain a thorough understanding of your financial status and pinpoint areas for enhancement. By scrutinising your income and expenses from the previous year, you can reveal patterns and trends that might be influencing your financial objectives. The concept behind assessing your cash flow is to

• Recognise spending patterns: Through monitoring your expenditures, you can identify areas of potential overspending and pinpoint unnecessary costs. Being conscious of this can enable you to modify your spending habits and allocate your funds more effectively.
• Assess progress in savings: Monitoring your savings can unveil whether you’re progressing toward your financial objectives, such as saving for a home down payment or retirement. This evaluation can assist you in deciding whether adjustments are necessary to your savings strategy or if increasing your contributions is warranted.
• Comprehend cash flow trends: Examining the patterns in your cash flow over time can uncover seasonal variations or unforeseen expenses that might necessitate adjustments to your budget. This awareness aids in preparing for forthcoming financial obligations and mitigating potential surprises.
• Make knowledgeable financial decisions: A thorough examination of your cash flow yields valuable insights that can steer your financial choices. You can leverage this information to make informed decisions regarding debt repayment, investment strategies, and adjustments to your budget.
• Establish attainable financial objectives: By comprehending your genuine spending and saving patterns, you can establish realistic financial goals that align with your financial situation and capabilities. This method hinders the establishment of impractical expectations and nurtures a perception of feasible financial objectives.
• Recognise opportunities for enhancement: Examining your cash flow can expose areas where you can refine your financial management practices. This could involve refining your budgeting techniques, considering alternative saving avenues, or negotiating more favourable terms on expenses.
• Encourage financial responsibility: Consistently assessing your cash flow promotes financial accountability, keeping you aligned with your financial objectives. Continuously evaluating your financial situation can pre-empt any financial regrets and foster a feeling of mastery over your finances.

Conduct a pro forma tax projection

Choose a pro forma tax forecast. This can assist you in making necessary adjustments before the year concludes. You can accomplish this by following these steps:

• Estimate annual income: Calculate your anticipated total taxable income for the year, encompassing earnings from salary, wages, investments, and any other income sources.
• Anticipated deductible expenses: Document any expected deductible expenses you foresee for the year. This might encompass items such as loan interest, increased investments, impending taxes, charitable contributions, and medical expenses.

Check your credit report

Examining your credit report is a vital measure in safeguarding your financial well-being. Routinely reviewing your credit report enables you to detect and rectify potential issues at an early stage, such as inaccuracies, unauthorised accounts, or fraudulent activities. Here are some fundamental reasons why it is essential to examine your credit report:

• Identify errors and inaccuracies: Credit reports may include inaccuracies, such as incorrect balances, missed payments, or accounts that aren’t yours. Regularly scrutinising your credit report enables you to recognise and report these errors to the credit bureaus, ultimately contributing to an enhancement in your credit score.
• Surveillance for identity theft: Utilising credit reports is an invaluable method for identifying indications of identity theft. Any unfamiliar inquiries, newly opened accounts, or suspicious activities found on your credit report may signal potential identity theft, prompting further investigation.
• Evaluate your creditworthiness: Your credit report plays a pivotal role in assessing your creditworthiness, a crucial factor for lenders when considering your eligibility for loans, credit cards, and other forms of credit. Consistently reviewing your credit report aids in comprehending your overall financial health and pinpointing areas for enhancement.
• Monitor your credit score: Your credit score, a numerical representation of your creditworthiness on a scale of 300 to 850, is a crucial aspect. Tracking your credit score over time allows you to assess the consequences of your financial choices and identify any elements that might be adversely influencing your score.
• Make knowledgeable financial choices: By comprehending the details within your credit report, you can make informed decisions regarding borrowing money, managing debt, and safeguarding your credit score.

Do you have enough liquid funds for emergencies?

Everyone should maintain a savings equivalent to at least six months’ income in a readily accessible liquid account for emergencies. Initially, establish a budget and adhere to it. This will assist you in monitoring your income and expenses, providing clarity on the allocation of your funds. Secondly, allocate a designated sum of money each month for savings. Even if it’s a modest amount, it will accumulate over time. Thirdly, contemplate implementing automatic savings. This involves the automated transfer of a fixed amount from your checking account to your savings account every month. Last but certainly not the least, seek out a high-yield savings account to expedite the growth of your money.

Are you saving enough for your retirement?

Commence saving for retirement as early as possible; the earlier you start, the greater the potential for your money to accumulate. Various methods exist for retirement savings, but it’s essential to assess whether you are saving adequately. Determine the number of years remaining until your retirement and evaluate your investment strategy for funding your retirement.

Are you allocating sufficient funds to market-linked investment options? What is the balance between market-linked investments and fixed-interest opportunities in your portfolio? Additionally, have you considered obtaining insurance, particularly health insurance, to cover medical expenses as needed? How do you perceive life insurance, and are you ensuring adequate financial provision for your loved ones in the event of an untimely death?

Revise the list of your beneficiaries

It is essential to routinely assess and modify the beneficiaries designated for your investments, bank accounts, and other assets. This guarantees that your assets are distributed by your wishes in case of your passing. Given that inheritance laws may change, maintaining an updated beneficiary list is crucial to align with your current preferences and prevent unintended consequences.

Begin by collecting all pertinent documents associated with your investments, bank accounts, and other assets that carry beneficiary designations. These documents may encompass account statements, insurance policies, property deeds, and statements from retirement accounts. Next, meticulously examine the designated beneficiaries for each asset. Record the names, relationships, and any percentage allocations assigned to each beneficiary. Subsequently, evaluate whether your existing beneficiary designations still reflect your intentions. Take into account any alterations in your circumstances, such as births, marriages, or changes in relationships.

If you believe adjustments are necessary to your beneficiary designations, reach out to the relevant financial institutions or custodians overseeing your assets. They will furnish you with the requisite forms and guidance to facilitate the update of your beneficiaries.

The current year has been a tumultuous journey marked by wars, the spectre of pandemics, and geopolitical tensions influencing market dynamics. As a result, numerous individuals have revisited their personal financial choices, while many others have sought out financial literacy courses. While everyone anticipates a positive conclusion to the year, past experiences underscore the importance of not being complacent with our finances.