I was talking to my girlfriend a couple of days after the US elections and unlike most, she had already shrugged off the analysis paralysis. “I’m moving back to the Caribbean,” she said, declaring an intention she had expressed to me earlier this year. “That means, no Carnival, no wild spending at Christmas, I’ve got to save and get prepared to make my move by next year.” The idea of a Trump Presidency might have animated my friend’s purpose but the end of the year is also a sobering time to scan the financial horizon and think about your money: where it’s been, where it’s going, and, most importantly, where you want it to go.
Whether you invested well, saved a little, or even if your money just didn’t work for you, it’s time to take financial stock, come up with a plan to act and determine where you want to go next.
Here are 7 questions to get you started.
- How much debt am I taking into the New Year?
Tally up what you have left to pay on your mortgage, business or personal loans, children’s education etc. Numbers tell an important story and as hard as it maybe, it is always better to know what that story is. In fact, the number you calculate at the end of the exercise should be the basis of your action plan next year.
- How much did I save this year? Your savings are important to get a handle on. If you bank online, the figure will be easy to assess. Could you have saved more? Did you plan to have more? If yes, what accounted for the shortfall? Can you add to your saving plan next year? Yes? No? Be honest. You want to work in a realistic manner with your savings.
- What do I want to save for in 2017? How will I accomplish that? Now that you’ve figured out numbers one and two, it’s time to set financial goals, like saving for your new business launch or paying off debt or setting aside a specific amount in savings. Figure out what strategies you’ll put in place to save, such as making lifestyle changes or automating your work with apps.
- Am I getting the most out of my credit cards? If you got your credit card a long time ago, chances are you haven’t assessed if it is still working for you. There are now multiple credit cards on the market and some of them come with a heap of great rewards, like reduced travel costs, lowered interest rates or even cash back. If your cards haven’t provided you with any perks, consider upgrading to a different card. If you have a card that’s dragging you down with high annual fees, think about closing it — provided you know consequences of doing so.
- Can you do more? Can you do more work, can you take in extra projects to make a bigger income? Can you freelance? Don’t be afraid to use your skills and the technology to earn more.
- How much money is in my emergency fund? You have no idea what 2017 could bring: sudden health crises, unexpected layoffs, or a downturn in business. While some parts of the world are recovering from a deep recession, others are heading into it. Make sure your emergency fund (about three to six months of living expenses) is robust enough to take care of you if need be. And if not, make it a priority to establish a healthy fund in 2017
- What are some poor money habits I can squash? Think about some areas in your daily (or monthly) life where you can save — or stretch your dollar. If you are living beyond your means, then it’s time to cut back. Eating out too much? Cook more at home. Tempted to go buy new clothes? Learn how to sew or revamp what you already own. Clothing swaps with friends or even your sister are fun ways to be stylish and keep up with sartorial trends. Know the red flags if you think you’re in financial trouble and decide to make a change in the New Year.