The new year is a time when many people make resolutions and set goals for the year ahead. So, it would be wise to channel this practice to towards ensuring your financial health- by setting goals for the new year, while also taking stock of the investments and financial decisions made over the course of this year.
Start with a Budget: Taking the time to sit down and analyze your expenses and spending patterns is the first step towards taking charge of your finances. It instills the discipline necessary to follow through on the goals you set for yourself.
Setting a budget required having to review your own behavior and assessing the pressure points of your spending patterns; and replacing any faulty patterns with ones more conducive to your financial progress.
Create a Personal Financial Inventory: Make a list of all your assets and liabilities. By keeping track of your assets such as your rainy day fund, your investment portfolio, real estate equity and so on, you can form a clearer idea of your baseline financial health.
From there, it becomes much simpler for you to prioritize your debt obligations and plan your major expenses for the year ahead.
Review your Tax-Plan: As an individual with a consistent stream of income, either from your profession or your assets, reviewing one’s tax liability for these assets becomes a vital aspect of any annual financial plan.
Taxes are a universal liability. For this reason, you might even consider scheduling a meeting with a financial expert to help you navigate the complex options and legalities in this regard.
For those with a consistent income from their assets, this becomes an essential aspect of deriving the most from their assets: to remain updated and to decide whether it would be better to exchange the assets one presently holds, for better tax benefits, and so on. Conducting some research into making donations to charitable organizations championing a cause close to your heart is a popular measure in reducing tax liability.
Review Your Investment Portfolio: Aside from tax liability, your investments are also subject to the market’s ups and downs. For this reason, it is important to take stock of the assets you currently hold and to adapt them to the apparent trends in the market in the upcoming year. Keep abreast of developments in the industries you’ve invested in. This is especially important during periods of economic flux. For example, if stocks are taking a dive, you might consider expanding your financial portfolio to include some real estate investments to balance it out.
Review your Retirement Plan: Make sure to work alternative sources of income into your plan that would last you beyond your current system of employment. Plan to set aside money for important milestone events that can prove to be a considerable expense. For instance, marriages in the family or planning for your childrens’ education, buying a house or a car, investing in long-term financial schemes and so on.
Ideally, your retirement plan should also include a Rainy-Day fund, wherein a portion of your regular income is set aside for unforeseen emergencies and financial liabilities. If you don’t have one already, establishing this fund is a good place to start with your financial plan for the year. It keeps you prepared for any sudden, drastic expenses and insulates your existing finances from any sudden shocks.
Invest in yourself: Last but not least, invest in yourself. Invest in a healthy diet, a decent investment plan, and in updating your professional skills. Compare and contrast different life insurance plans until you get the one right for you. With these in order, you’re setting yourself up for more than just a good year of finances- you’re investing in a lifetime of financial health.
Looking into and hiring a financial advisor would also count as an investment in yourself. With the growing complexity of the economy and the laws governing tax and personal assets, it becomes necessary to have dedicated insight in order to produce a coherent and beneficial financial plan. If you haven’t sat down with a financial advisor or planner before, consider writing that in as an essential aspect of your financial checklist for the new year.