DIY Year-End Financial Check-Up: A Guide

As we approach the end of another year, it's the perfect time to reflect on our financial journey and set the stage for the coming year. Conducting a Do-It-Yourself (DIY) year-end financial check-up is a proactive way to assess your current financial health, make informed decisions on any changes that need to be made, and set realistic goals for the coming year. In this guide, we will walk through this annual self-check that will guide you toward success.

Step One: Budget & Account Review

Begin by revisiting your budget for the year. Evaluate your spending patterns and compare them to your initial budget projections. Identify areas where you may have overspent or underspent and assess whether your financial goals were met. This is the time to objectively assess ourselves in a non-judgmental manner. We seek to identify potential areas for growth. You will also seek to review your emergency fund. Remember, your emergency fund is optimally sufficient to cover at least three months' worth of living expenses. As we review our current finances, we can adjust contributions to bolster this financial safety net.

Step Two: Credit Check

Obtain and review your credit reports from the major credit bureaus. Look for any discrepancies, errors, or unauthorized activities. A clean credit report is crucial for maintaining good financial health. You may consider freezing your credit, a free preventative measure to prevent new credit pulls without your authority. This is also when you can take stock of your outstanding debts, including credit cards, loans, and mortgages. Evaluate the interest rates, outstanding balances, and payment schedules. Develop a plan to pay down high-interest debts strategically.

Step Three: Insure Yourself

Review your insurance policies, including health, life, and property insurance. Ensure that your coverage is adequate and update it if there have been significant life changes, such as a new home, marriage, or the birth of a child. During open enrollment, prior to January 16th, make all the updates you wish for your health insurance coverage.

Step Four: Invest the Rest

Review your investment portfolio. Assess the performance of your investments and consider rebalancing your portfolio if needed. Ensure that your investment strategy aligns with your risk tolerance and long-term financial goals. If you have retirement accounts, such as a 401(k) or IRA, assess your contributions. Consider maximizing your contributions to take advantage of tax benefits if you have the excess prior to April 18th.

Step Five: Reflect & Celebrate

Finally, reflect on your financial achievements and challenges from the past year. Based on this reflection, set realistic financial goals for the upcoming year. Whether it's saving for a specific purpose, paying down debt, or investing, having clear objectives will guide your financial decisions. Remember, financial well-being is a journey, and regular check-ups are key to staying on the path to success.

Sources:

https://www.irs.gov/retirement-plans/traditional-and-roth-iras

https://www.healthcare.gov/blog/open-enrollment-for-2024-coverage-starts-soon-get-ready-now/