As the year draws to a close, it is a great time to get your finances in order to prepare for the coming year. An annual financial plan could be the way forward as it gives you a chance to consider your financial health overall. By considering all your assets, accounts and estate itself you are able to adjust your spending, saving and plans in the future. Here are some things to consider for your annual financial plan.
Create a personal inventory
Before you can think about the future you need to know exactly what you have and where. Make a list of all of your assets including any real estate equity, savings, expensive items such as jewellery and retirement funds.
Alongside this, make a list of any liabilities you have such as debts, credit card loans, mortgages or education loans. This will allow you to see exactly where everything stands.
Set financial goals
Once you have a snapshot of your financial health, you can start setting yourself financial goals. You may want to have different timespans in mind. A short or mid-length goal could be to establish an emergency fund.
A longer-term goal could be to increase your retirement fund or to work towards a large purchase such as a new house.
Update your estate plan
Having a plan for your estate in the event of your passing is important and should be prioritised the older you are, especially if you are nearing retirement. Once you have an established plan it is worth checking it regularly to make sure any additions are dealt with or parts that have become irrelevant are removed.
It may feel daunting dealing with estate planning, so it might be worth speaking to an expert estate planner. They will be able to guide you through the process and give you confidence that everything is squared away.
Review your emergency plan
As recent years have demonstrated, life can throw any number of spanners in the works. Having an emergency bank account in place will give you peace of mind that if something were to happen, your outgoings would be covered for a while.
Using your financial snapshot, see how much you can realistically afford to save each month. You may want to create a joint account with your partner and join finances. Over time, this will build up and be a sizeable cushion.
Although the COVID years were long, you should aim to have enough money to live comfortably for around 6 months. This figure will differ between households as more jobs now can easily transition to remote working, but if you were to lose your job it gives you time to apply for another.
