You can get away from your job, your home, and your neighbor’s barking dog, but your finances follow you wherever you go. So, it makes sense to review your financial situation at least annually to find out where you stand and whether you need to make any changes to your spending plan.
When you developed your spending plan, you probably had a clear picture of your monthly expenses — mortgage or rent, utilities, food, transportation, taxes, clothing, entertainment, savings, and other bills. But, over time, some costs may have changed. Your taxes may have increased, your utility bills may be higher due to rising fuel costs, and so on. By reviewing the past year’s income and expenses, you’ll be able to tell if your plan is still realistic or whether you need to make adjustments.
Track expenses by going through your checkbook register or online banking statements to find out exactly how much money you’ve spent on each budget item. Compare the actual amounts with your budget estimates and then adjust your plan if necessary.
Do you carry a balance on your credit cards? If so, do you know what the balance is on each card? It’s easy to forget how much you’ve charged — until your statement arrives and you discover that the total is bigger than you expected.
To reduce your balances, pay more than the minimum each month and stop charging. Then, come up with a concrete plan to reduce your debt. You could save a bundle of money in interest charges.
Contributing the maximum amount to your employer’s retirement plan — or at least enough to take advantage of any employer match — can help you reach your future financial goals. Be sure to measure the performance of all your investments against appropriate benchmarks and rebalance your portfolio if you need to.
Thinking about your tax situation now may save you money at income-tax time. Review tax-saving strategies, such as making charitable donations, funding an individual retirement account, and bunching or deferring miscellaneous and medical expenses.