So, if you’ve read the previous blog series, you’ll have organised your paperwork and your financial life in general. That’s all well and good, but now we’re in good shape, we need to keep it that way and for that, we’ll need an annual review.
Reviewing your finances annually is important. It prevents drift, where things get increasingly out of whack and then take an almighty effort to realign. Tiny course-corrections throughout the year as needed, and then a bit of concerted time once a year should be all you need to do to keep your financial life in tip-top shape.
Review Your Paperwork
You’ve got your paperwork under control, but inevitably, over the course of a year, things might get a bit untidy. With the files now nicely organised and easily accessible, it shouldn’t take long to thin things out and check everything is where it should be.
Work your way through the filing cabinet, taking out one file at a time. Make sure you don’t have anything in there which doesn’t need to be kept. File anything that needs to be filed, making notes of any actions as you go through. With the paperwork in its proper order, we can now deal with the main points of an annual financial review one step at a time.
Review Your Cashflow
The bedrock of all financial planning is cashflow – money in and money out. It’s a good idea, therefore, to take a look at what has gone out over the past year. Review how well you have stuck to your budget, if you have one.
Were there any patterns that emerged throughout the year? Are any of your spending categories clearly not working for you? Can you spot any weaknesses or trigger points when looking at a year’s worth of spending?
I use YNAB to track my spending, assigning categories to every transaction. Most of the modern banking apps can do something similar. Use the data there to take a high-level look at your outgoings and see if there is anything you need to drill down into.
Also look at your income. Was it exactly as expected, or were there any surprises? Were your work patterns – and hence your pay patterns – constant or changing? Can you learn any lessons from this to enable you to plan ahead better?
Were there any one-off expenses that you hadn’t planned for? How did you cope with them? Did you manage to budget around them, or did your finances take a bit of a beating? None of this looking back should be judgemental. Be objective – the idea is to learn lessons you can apply going forward.
Review Your Calendar
Next, take out your calendar and look back over the year. What events occurred of importance and what impact did they have on things? More importantly, look forward to the coming year. Are there some big events you need to prepare for, financially speaking?
What about planned expenditure like changing the car, getting the roof done or a big holiday? Taking a short time to sit down and think about the coming months is a great discipline.
It minimises the chances of not being fully prepared for what’s coming down the line. If you have bills which you pay annually, mark them on the calendar too – it’ll keep them front of mind when the time comes.
Leave a Reply