Performing a Yearly Financial Overhaul

The only way to really know which direction your finances are headed is to take a close look at them on a regular basis and make any necessary changes. Take these steps to overhaul your finances at least once per year.

We’re told to replace our smoke detector’s battery every year, but what about our budgets and financial plan? Are they charged and ready to go for next year? Every November (once we find whether a salary increase is coming or not), we revamp our spending plan. Each time it gets easier as there is more “tweaking” involved, and less “chucking to start from scratch.” We evaluate using these questions.

Was each category adequately funded? When we came to the clothing account, was it empty far too often and we had to “borrow” from somewhere else to get a winter coat or a pair of shoes? Are any costs increasing next year? Taxes? Rent? Utilities? Just where will the money come from?

Can we cut back within an existing category, like food? Or clothing? Can we lower the thermostat? Or use less electricity? Are there options for our health needs? Can we reduce our car insurance premium? This is where strategies come in and where most personal finance resources put their efforts. Dollar Stretcher archives are a great place to start.

Have any life changing events impacted our budget? Our son starting college has. It’s resulted in lower food costs and higher school expenses. When our youngest broke his arm, that made a huge dent in our medical account. Hopefully a raise is coming this year. But we’re also responsible for a greater share of health costs. Recovery from or planning for a financial blow takes thinking through the options.

Is there any wiggle room? Being financially blind-sided is no fun. Been there and bought the tee shirt. An emergency fund gives you the freedom to roll with the punches a bit more, and even help someone else if they’re in need. We try to have one in addition to the cushion.

So let’s crack open our budget books, sit down with a cup of coffee, and tackle the job.

• Why You Need a Spending Plan Instead of a Budget
• 8 Reasons You Don’t Have an Emergency Fund
• Give Your Finances an Annual Check-Up
• How to Get Started Saving for Retirement in Your 20s 30s and 40s
• Playing Catch-Up with Your Retirement Savings

Reviewed December 2019