December and January are the perfect months to look back at what you earned, saved and spent during the past year, as W-2s, account statements, and other year-end financial summaries roll in.
Start by taking a look at your account balances. How much did you save for college or retirement? Were you able to increase your emergency fund? If you were saving for a large purchase, did you save as much as you expected?
Challenge yourself in the new year to save a little bit more so that you can make steady financial progress.
Review any investment statements you’ve received. How have your investments performed in comparison to general market conditions, against industry benchmarks, and in relationship to your expectations and needs? Do you need to make any adjustments based on your own circumstances, your tolerance for risk, or because of market conditions?
Tracking your spending is just as important as tracking your savings, but it’s hard to do when you’re caught up in an endless cycle of paying down your debt and then borrowing more money, over and over again. Fortunately, end of year mortgage statements, credit card statements, and vehicle financing statements will all spell out the amount of debt you still owe and how much you’ve really been able to pay off.
Keep these statements so that you have an easy way to track your progress next year.
If you’re covered by Social Security, the W-2 you receive from your employer by the end of January will show how much you paid into the Social Security system via payroll taxes collected. If you’re self-employed, you report and pay these taxes yourself. These taxes help fund future Social Security benefits, but many people have no idea what they can expect to receive from Social Security in the future.
This year, get in the habit of checking your Social Security statement annually to find out how much you’ve been contributing to the Social Security system and what future benefits you might expect, based on current law. To access your statement, sign up for a mySocialSecurity account at the Social Security Administration’s website, www.socialsecurity.gov.
Once you’ve reviewed your account balances and financial statements, your next step is to look at your whole financial picture. Taking into account your income, your savings and investments, and your debt load, did your finances improve over the course of the year? If not, then why not?
Then it’s time to think about the changes you would like to make for next year. Start by considering:
• What are your greatest financial concerns?
• Do you need help or advice in certain areas?
• Are your financial goals the same as they were last year?
• Do you need to revise your budget now that you’ve reviewed what you’ve earned, saved
• Using what you’ve learned about your finances, good and bad, to set your course for next year can help you ensure that your financial position in the new year is stronger than ever.
Life is a journey, plan for it…
Neil A. Brown is a CPA and CFP with Burkett Financial Services in West Columbia. Reach him at www.uscneil.com or (803) 200-2272