As we ring in the new year, it's the perfect time to take a closer look at what you earned, saved and spent. It's also time for W2s, account statements and other year-end financial statements to arrive in your mailbox and in-box.
Plus, it's always nice to begin the new year with a clean slate and a clear look at your financial picture. What's more, having all of this information is extremely helpful as you plan this year's budget. All right, let's get started.
1. How much did you save?
You've heard the saying, "A penny saved is a penny earned." Let's start by taking a look at your account balances and comparing the beginning of the year to the end of the year. How much did you save for retirement or college? Were you able to start or increase your emergency fund? If you're saving for a big purchase, did you save as much as you had hoped?
2. How did your investments perform?
If you have investments, take a few minutes to gather and review any investment statements you've received. How have your investments performed compared to general market conditions and industry benchmarks, and related to your expectations and needs? Do you need to make any adjustments based on your circumstances, your tolerance for risk or because of market conditions?
3. Were you able to reduce debt?
Tracking your spending is just as important as tracking your savings. But it's hard to do when you're caught up in an endless cycle of paying down your debt and then borrowing more money. Fortunately, end-of-year mortgage statements, credit card statements and vehicle financing statements will all spell out how much you still owe and what you've really been able to pay off. You may even find that you're making more progress than you think. Keep these paper or online statements handy so you have an easy way to track your progress next year.
4. Where did your employment taxes go?
If you're covered by Social Security, the W-2 you receive from your employer by the end of January will show how much you paid into the Social Security system via payroll (FICA) taxes. If you're self-employed, you report and pay these taxes (called self-employment taxes) yourself. FICA taxes help fund future Social Security benefits, including retirement, disability and survivor benefits. However, many people have no idea what they can expect to receive from Social Security when the time comes.
This year, get into the habit of checking your Social Security Statement annuals to find out how much you've contributed to the Social Security system and what future benefits you might expect, based on current law. To access your Statement, sign up for a mySocial Security account at the Social Security Administration website, socialsecurity.gov.
5. Did your finances improve?
Once you've reviewed your account balances and financial statements, your next step is to look at your whole financial picture. Taking into account your income, your savings and investments, and your debt load, did your finances improve over the course of the year? If so, congratulations. If no, think about why not.
New year. New goals. New successes.
Now is the perfect time to contemplate the changes you'd like to make for the new year. Start by considering:
- What are your greatest financial concerns?
- Do you need help or advice in certain areas?
- Are your financial goals the same as they were last year?
- Do you need to revise your budget now that you've reviewed what you've earned, saved and spent?
Use what you've learned about your finances to set your course for the new year ahead. Challenge yourself to save more and spend less so you can make steady financial progress.
Of course, if you need help or want access to useful tools, feel free to reach out to our resident Financial Planner and CPA. You can reach Paul Wannemacher at 419-464-3034 or firstname.lastname@example.org
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