As the year winds down, it’s the perfect time to review your financial picture and create goals that will set you up for success in the New Year. What did you do right this year with your budgeting? Where could you have made smarter choices? What expenses are on the horizon that you need to be planning for? Don’t let questions like these keep you from enjoying the spirit of the season. The answers may be easier, and less stressful than you think.
Review Your Finances
Before you do any goal-setting or planning, you’ll need to take a deep dive into your financial situation. To do this, you’ll want to know how much you made, what you spent, and what you owe. Here are four ways to jumpstart your New Year’s planning.
1. Recap the past year.
It’s always helpful to get a sense of how the year went. Here are some questions to consider:
- Did you have any significant or unexpected expenses (e.g., major repair work)?
- Did you achieve any major milestones (e.g., retirement, getting a new mortgage or paying it off)?
- What else happened this year? Perhaps you got married, had a child, got divorced or suffered health setbacks.
Take time now to document those issues or incidents to think through the financial impact they may have had.
2. Figure out where you stand.
To see how your finances shape up, create a simple spreadsheet, or use a software program such as Mint.com that sums up these items:
- Income: How much did you (and your spouse) earn this year? Did you have other income other than wages?
- Annual expenses: How much did you spend this year?
- Savings: How much do you have in your savings accounts, including your emergency account, CDs, or any other interest-bearing account?
- Review your investments and retirement accounts
- Debt: How much do you owe and to which creditors?
3. Check your credit score.
Now is a good time to check your credit score, which is available free by visiting annualcreditreport.com. Additionally, you should find out your FICO score (generally, available for free through your credit card company), which is how creditors assess your credit worthiness and ability to pay back loans.
4. Review your life insurance.
Life insurance is part of a well-rounded financial portfolio. Now is a good time to ensure your beneficiaries are current including their relationship to you. You will want to review the type of life insurance you have and whether it is appropriate to your financial plan, especially if things changed in your family this past year (see point 1). If you’re not sure whether you have adequate coverage for yourself or your loved ones, review the life insurance options AAFMAA has available for you.
Once you’ve determined the state of your financial well-being, you will know what areas you may need to work on. These could include:
Taking the time now to review your finances and credit, and then setting clear, strategic spending and saving goals, will set you up for a successful and prosperous New Year. Reach out to AAFMAA Member Services at 1-888-481-4927 today to discuss your finances and whether you need more life insurance.