End of Year Checklist: Review Finances and Celebrate Achievements

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review finances new year

End of Calendar Year and End of Financial Year are Perfect Time to Review Finances

The end of the years are the perfect times to review progress towards your goals for 2021 and set new plans for the next. Use this checklist to make sure you are on top of your financial goals and take a moment to appreciate achievements from the past year.

Record your Net Worth

Monitoring your net worth can confirm you are moving in the right direction. It is motivating to see progress set out in a spreadsheet or graph, particularly over a few years. I have mine recorded since 2009.

In order to update your net worth, you will need to spend time logging into each of your accounts, including superannuation and possibly estimating the value of properties.

Net Worth = Total Assets – Total Liabilities

The easiest way to monitor this is to record it in an excel document, save it to the cloud.

Review Finances: Income

How much income did you take home this year? If your income has increased, did you direct this extra cash intentionally towards savings, investments or effective spending?

It’s just too easy for this money to disappear without any appreciable increase in life enjoyment. To make sure I use these small incremental increases in income, I correspondingly increase my direct debit towards ETF investments.

Review Finances: Expenditures

Time to review your outgoings for the year 2021. You can use an expense tracking app or just download your bank account data and manually categorize it into an excel document. What are your top expenditure categories? Is your spending aligned with your values? Is there still any wasted spending you can identify?

How do you want to adjust spending for 2022?

Review Finances: Tax

I find I don’t find out exactly where I stand until I have received my tax returns, division 293, and excess concessional contributions bills (Apply to income > $250,000 or concessional contributions > $27,500). If you didn’t get a chance to review everything at end of the financial year, now is the time.

Salary Sacrifice & Salary Packaging

How much tax did you pay this year? Do you need to stop procrastinating and set up salary packaging and salary sacrifice.

Varying Tax Witholding

If you are a great money manager, an employee, and own property investments, consider varying your tax withholding. If you are expecting a significant tax return, instead of waiting to receive it at the end of the tax year, you can request your employer withholds less pay each month. You could increase payments into your mortgage offset or into an automated investment.

Review Finances: Charitable Donations

Do you have an intentional giving plan, or are you just randomly donating when the requests come? Are you confident you are donating effectively? Are you happy with the amount or would you like to increase your annual donations next year?

This is such a personal area, but I love the way Effective Altruism explains how and why they think certain charities deploy your dollars with maximum positive impact. Aussie Firebug just interviewed the chairperson and board member of Effective Altruism Australia. You can find the podcast episode here.

review finances

Get Mortgage Ready or Review Your Mortgage

It’s sensible to check your credit score every year regardless. But it is especially important if you are planning to purchase a home within the next year. Your score impacts your ability to borrow at all, the limit you are allowed to borrow and the interest rate charged. You want banks to see you as a sure thing.

If you are lucky enough (!) to already have a mortgage, check this annually to make sure you are paying a competitive rate and are utilising an offset if appropriate.

Review Super

You should at least log in to your account and check that your super payments have been received. If you haven’t done this in the last 5 years, review whether you are happy with your super fund.

Again, if you haven’t reviewed your investment allocations in the past 5 years it’s time to check in. Is your asset allocation aggressive enough to hit your goals, whilst conservative enough for your volatility tolerance and age?

Maximize Concessional Contributions

Many younger people are hesitant to put extra into super, due to the risk of changes. This is a valid concern, but I don’t think the risk warrants throwing money away.

It would be mad not to meet the criteria to seize any employer super bonus contributions. You may wish to consider salary sacrificing to top super contributions to the full concessional limit (currently $27,500).

You can now catch up on concessional contributions for up to 5 years. If you are expecting to receive a large salary boost within the next 5 years, you may wait until then to maximize concessional contributions.

Review Savings & Investments Outside Super

Reviewing asset allocations every 5 years is appropriate, as performance is inevitably variable over time. A rubbish year in 2021 may be followed by a meteoric year of returns in 2022.

You may need to rebalance your portfolio. If the end of the calendar year is when you have planned to do this, take time to make sure it is done in the most tax-effective way. Selling investments inside super may be a more tax-effective way to rebalance your total investments.

Check Professional Development Funds

If you need to use or lose a professional development allowance each year, twice a year reviews are a practical way to make sure you are on track. Don’t let it go to waste!

new year finances

Review Insurance

We should all probably review our personal insurance needs every year.

Income protection has become incredibly expensive this year, with routine ~75% increases for those of us with a “level” agreed value policy. The newer policies, with far less favourable terms, are not cheap either.

Review your insurance needs. Think through worst-case scenarios. If each household income earner died, was permanently unable to work or unable to work and needed ongoing care.

Each year considers if you can reduce your insurance, or increase your total permanent disability insurance to provide more affordable cover in case of disaster.

Review Goals for 2021

Did you set financial goals for 2021? Are they written down somewhere? In the chaos of the year, it is easy to forget about your goals. Find them and review them. How much did you achieve? Are the goals still relevant or did circumstances or aspirations change since last year?

What financial goals would you like to set for 2022? They should be based around your broader life goals, rather than arbitrary dollar amounts.

Are you Funding Your Carpe Dium Goal?

Don’t delay gratification forever! What is that “One day” you always plan to do, but never get around to? Write it down. Set a date and work out a plan to make it achievable! If not now, then when?

Life and Finances End of Year Review

Start the new year with a firm plan, based on your goals for living your best life. Spend a little bit of time reviewing your finances. Important financial decisions need regular scrutiny and adjustments to accommodate your changing situation and goals.

Hoping for a fabulous 2022.

Aussie Doc Freedom is not a financial adviser and does not offer any advice.  Information on this website is purely a description of my experiences and learning.  Please check with your independent financial adviser or accountant before making any changes.

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