It is a predominant notion that the end of the year is optimum for getting one’s finances in place. Well, this is true – in order to start off the new year on a happy note, one must start off at least a month ahead. Before commencing, ask yourself: have you been paying your credit card dues on time? How many instant cash loans have you availed in the last five years? Does your investment portfolio look good? Before welcoming the new year with zest, it is advisable to assess the current year in terms of your finances. If you wish to secure your future from a financial standpoint, here are 5 financial moves that you must make before the end of 2018:
1. Sort Out Your Financial Goals
Assuming that you already have a set of financial goals in place, how far have you reached in terms of achieving them? It is understandable that some of your goals might be long-term and would take a while to be met or achieved. However, it is crucial to focus on your short-term goals and gauge how far you have come along in 2018 in terms of accomplishing them. Review the status of your goals over the weekend, as this will allow you to take stock of what’s working, and where exactly you are falling behind. Also, doing this exercise will allow you to prioritise your goals or set new ones for the upcoming year.
2. Revisit Your Budget
It is extremely important to set a budget – in case you haven’t, it is best to do so now. Review your budget before the year ends and ask yourself the following questions throughout the process:
- Have you managed to stick to your budget, or have you exceeded the same on multiple occasions?
- Do you have too many unexplained/sudden/impulse expenses?
- Were you able to save enough post catering to your expenses?
- Did you have to avail short term personal loan in order to make an exorbitant purchase?
- Are there any miscellaneous expenses that can be cut?
Reviewing your budget while keeping the above questions in mind can help you analyse your expenses better and check whether your priorities are in place. Based on your review, you can rework on your budget for the next year to maximise savings.
3. Evaluate Your Debts & Pay-Off Strategy
If you have too many outstanding debts, it will harm your financial health in the long run. Analyse your debt situation – how many loans and credit cards do you have? Have you been making monthly repayments on time? Have you borrowed from your friends and family? The habit of ‘paycheck-to-paycheck’ is not good for your finances, as it is essential to learn to live within one’s means. Bring changes to your spending patterns, cut down on unnecessary expenses and dedicate more of your income towards clearing debts and savings. If you already have a maxed-out credit card or too many outstanding loan payments, focus on resolving these issues first. Do not take any new loans, as this will only add to your burden and harm your credit score in the process. You should also take measures to rebuild your credit score for greater creditworthiness.
4. Rebalance Your Investment Portfolio
Investment is essential for garnering wealth in the long run. Rebalancing your investment portfolio at least once a year is a must – the end of the year is a good time to do so. Let us envision a hypothetical situation: suppose, your investment portfolio consisted of 70% stocks and 30% bonds at the beginning of the year. Over the last 10 months, your investments might have performed well, however, your bonds have suffered. Now, your allocation might be 90% stocks – this leads to a disbalance in your portfolio, which is now exposed to higher risks. Keep in mind that one should only rebalance when their financial objectives have not undergone change. If you find it difficult to manage your finances, you can always take the help of a financial planner.
5. Review Your Insurance
As change is an inevitable part of life, it is essential to acquire adequate insurance coverage to help combat contingency situations. Review your insurance at least once a year and make relevant changes, if any. You might have purchased a new home or sent your child abroad for further studies – based on the magnitude of the change, you might want to consider increasing your insurance coverage.
While it is important to set a budget and save for emergency situations, do not limit your existence if you can afford to make certain financial decisions. Go on short trips across the state or pursue your hobby – invest in things that will help you grow as an individual. By attaining a healthy balance between financial judiciousness and fulfilment of desires, one can live a wholesome life.