Whoosh! That sure went by so fast! With just over two weeks to go in this year, it is time to do a self-review to see how you did this year, how your managed your money and whether you came ahead or not?
How do you do this?
One easy way to start is to look at your net worth, which is the difference between a person’s assets and liabilities. It is a measure of wealth and financial well-being. So let us say you increased your savings this year and house went up in value, while your debt went down, then your net worth will have gone up which is a good and easy measure of a successful year. The opposite would be true if your debt level has gone up, while your assets value has gone down.
Did your savings make the cut?
If you like to focus on specific areas, then it is a good idea to look at your savings and whether it went up (or went down)? if you only have one savings account, look at the account value now and compare it to the beginning of the year. Given today’s economic uncertainties – including inflation – if your savings went up at all, consider that a good job on your end. If you saved up by more than 20%, then you have done really well. If you barely saved or didn’t save at all, it is time to go through your budget to find any extra money to save. Can you cut from any of your bills? how about grocery bill or personal spending. Even 1-2% extra money you can find to save would add up in the long term.
Did your debt go south?
Next, assess your debt level, assuming you have it like most people these days: Did you manage to bring it down, did it remain the same, or did it go up? Regardless of where your debt went this year, you need to do some number analysis and review. I have a habit of going through my last 12 monthly credit card statements, and going through each item line by line. Some banks and credit card companies may have an online dashboard in place to do this for you automatically, something my bank doesn’t really offer. So I manually go through each line and see where I wasted money, what I could have done without, and form new trends to watch out for in the coming year. For example, last year, we noticed that we spent too much money on McDonald’s for my son, not only wasting valuable money but getting him addicted to fast food from an early age. Having spotted this trend, we decided to scale it down for this year, and so far we have done pretty good in that effort. To address this, we’ve introduced healthier alternatives at home, encouraging better eating habits. By being mindful of our spending and making conscious choices, not only have we saved money, but we’ve also taken a positive step towards promoting a healthier lifestyle for our son.
Identifying Hidden Expenses and Making Smart Cutbacks
Last but not least, go over any recurring monthly payments or subscriptions and see which ones dragged you down. For example, you may not have noticed or paid attention, but if you are paying for the following 4 popular services all at once, then it is costing you close to $600 a year or more, depending on your tier: Netflix, Spotify, Prime, Costco. Each on its own, it may seem like it is a bargain for what you get out of these, but added together, you can see that it adds up significantly. This can also apply to other things you may think are important, but rarely use. For example, as important as a GYM membership is for your body and mind, if you paid hundreds of dollars for it, but don’t recall the last time you went, it is probably time to cut that off of your budget. Maybe replace it with a home treadmill?
If 2023 was a bad year for your money and finances, don’t despair; instead, use it as an opportunity to reassess your financial strategies, identify areas for improvement, and set new, achievable goals for the coming year. After all, the new year is around the corner so you won’t have to wait long for your comeback. And if you had a good or great 2023, then keep doing more of what you have been doing and try to improve on it to get an even better 2024.