How to give yourself a beginning-of-the-year financial review?

Texas People FCU Blog

Q: Giving yourself a beginning-of-the-year financial review to see where your finances stand. Where do you begin?
A: Giving yourself a beginning-of-the-year financial review is a wonderful way to check on the progress you’ve made toward your goals. Highlight areas needing improvement and update your accounts, funds, and investments.


Step 1: Review all your debts and create a payoff plan

Take a few minutes to list all your debts and their interest rates. Have you made any real progress towards paying them off this year? Or have you stuck with minimal payments each month, leaving the actual balance to pile up since you’re mostly just paying for interest? We get that 2020 was an extremely hard year, and many things happened to not only jobs but how we have been living.


So if your debt needs some help, you have two primary options for how to proceed in 2021:

• The avalanche method. Focus on paying off the debt with the highest interest rate first, and then continue to the debt with the second-highest interest rate. Move through the list until you’ve paid off all debts.
• The snowball method. Work your way through your debts, starting with the lowest balance debt. Then, once it’s paid off, apply the payment that was previously committed to the debt to your new lowest debt. Repeat through the rest until all debts are paid off.
For both methods, be sure to pay the minimum balance on all your other debts each month. Try to boost your income and/or trim your monthly spending for extra cash and use it toward the first debt you are paying off completely.


Step 2: Automate your savings

Review your savings from 2020. Have you reached your goals? Did you forget to put money into savings each month?
Going forward, make it easy by automating your savings. Set up an automatic monthly transfers from your checking account to your savings account. This way, you’ll never forget to put money into savings again.


Step 3: Review the progress you have (or haven’t) made on financial goals

Did you make measurable progress toward your goals in 2020?
Take a few minutes to review your past goals, didn’t make any? Now is the time to determine what goals you want to make and start moving toward achieving them.


Step 4: Review your retirement account(s)

As you work through this crucial step, be sure to review the following variables:

• Your employer’s matching contributions to your 401K. Are you taking advantage of this free money, or leaving some of it on the table?
• The maximum IRA contribution limits for 2021 (at the IRS website). You will likely need to make adjustments for the coming year.


Step 5: Create an ICE Binder

The events of 2020 underscored the importance of making plans in case one becomes incapacitated for any reason. Create an In-Case-of-Emergency (ICE) Binder to hold all your important documents in one place just in case the unthinkable happens. Because of the sensitive nature of the information it holds, be sure to keep this in a safe place where it will not fall into the hands of identity thieves.


Include the following in your binder:

• Account information
• Medical information
• Online account and passwords
• Insurance policy documentation and details


Step 6: Set new financial goals for 2021

As you finish reviewing your financial progress of the past year, look forward to accomplishing greater financial goals’ this coming year. If you never started in 2020, 2021 just started so make your lists.

A great way to turn dreams into reality is to set goals that are SMART:


Here are some goals you may want to set for the coming year:

• Create a monthly budget before February. Be sure to include all expense categories. Review on the first of each month and tweak as necessary.
• Review the week’s spending each Saturday or Sunday.
• Pay off your largest credit card bill by 2022.
• Start a vacation fund before March 1st.
• Cut out something, such as an extra cup of coffee, magazine subscription, going out to lunch every day etc.
• Cut your weekly grocery bill by 10 to 15% before May 1st.


Here’s to a financially healthy 2021!