3 Important Items for Your Annual Financial Review

​Do you have a list of New Year’s resolutions? Does that list include financial goals and objectives, like paying down debt or boosting your savings? Now is the perfect time to analyze your financial situation and develop a list of action items. A regular annual financial checkup can help you stay on top of potential risks and on track to meet your biggest financial goals.
 
However, if you’re not in the habit of regularly reviewing your financial needs and goals, you may not know where to begin. Below are three items to include on your financial checklist. If you haven’t reviewed these items recently, the beginning of the year may be the perfect time to do so.

Financial Inventory
A financial inventory is a summary document that can give you a clear view of your financial picture. It contains every important component of your personal finances. For example, it may list your assets, debts, investments and much more. Your inventory can give you insight into your financial situation so you can set appropriate goals and objectives.
 
Begin with statements and documents related to your savings, investments, property and other assets. You’ll also want to include documentation related to your debts, such as your mortgage, car loans, credit cards and more. You can calculate your net worth by subtracting your debts from your assets.
 
You also may want to include risk management tools like emergency savings, life insurance, and disability insurance. Consider what risks could threaten your financial future. What would happen if you lost your job or were physically unable to work? What would happen to your family if you passed away? Identify the assets that could be used in the event of an unplanned financial challenge.
 
Once you have completed your financial inventory document, you can use it as a reference point to quickly gauge your current financial standing. For example, your financial inventory may tell you that your debt is very high relative to your assets. Or you may realize that your savings balance isn’t as high as you thought. This can help you set goals for the upcoming year.

Budget
A budget can be a powerful financial tool. When used properly, it can help you see where your money is going and help you make smart purchasing decisions. Unfortunately, nearly 60 percent of all Americans don’t use one.1
 
There is a wide range of apps, websites and software that you can use to develop your budget. You could also simply use a spreadsheet or even a pen and paper. Start with your monthly income. List your income sources, and then add up the total.
 
Next, itemize your expenses and break them into categories. The categories should fall into two groups: fixed and discretionary. Fixed expenses are those that you have to pay every month, such as your mortgage or your utilities. Discretionary costs are flexible, like dining out or shopping.
 
Compare your income with your total expenses. If your income exceeds your spending, you have money available to save. If your expenses are higher, you need to make changes to your lifestyle and your purchasing decisions. Visit your budget frequently to make sure you’re being disciplined and staying within your means.

Short- and Long-Term Goals
Finally, your annual financial checkup should include some form of goal-setting for the coming year and beyond. The new year is all about setting resolutions. Use your financial checkup as a springboard for action that can help you retake control of your financial future.
 
You could set a goal to pay off your high-interest debt by some point in the future. You could increase your retirement savings. Perhaps you could work to build a larger emergency fund. Set goals for the short and long term to improve your financial stability.

Ready for your annual financial review? Let’s talk about it. Contact us today at First Fidelity Group. We can help you analyze your needs and goals, and then refer you to a financial professional. Let’s connect soon and start the conversation.

 
1http://money.cnn.com/2016/10/24/pf/financial-mistake-budget/index.html


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