Money Matters with Nimi: It is Time for your Annual Financial Check-up

How have you fared through 2022? The end of a year is always a good time to stop and look back at what, for many, has been a challenging year financially and otherwise, and to prepare yourself for 2023. Here are a few things to consider as the year comes to a close to ensure that your financial life is on a sound footing for the new year. 

Did you start a new job or leave a job? Did you get married this year? Did you start a family? Did you retire? Did you get divorced or widowed? Whether there have been notable changes in your personal or professional life, or even if it has been relatively uneventful, your personal finances need periodic attention.

Do you know where your important documents are? All your difficult-to-replace legal and financial documents should be stored safely and securely. These include your will, trusts, power of attorney and title documents for your assets such as your property, cars and so on. 

Advertisement

Take a look at your spending over the past year? How much did you save or invest this year? Most financial advisors suggest that you should save between 10% and 15% or more of your income. Have you built an emergency fund? The easiest way to start to grow your savings is to automate it by putting a direct debit in place so that you won’t be tempted to spend all your income but rather have it directed to an appropriate savings vehicle. 

Have you managed to reduce your debt in 2022? Do you now carry less debt today than you did on 1^st January this year? Until you face up to your debt it will continue to grow. Which loans charge you the highest interest rate? Start to tackle those first. Don’t ignore your debt or wish it away; if it becomes a burden, it is worth approaching your lender to discuss the possibilities for restructuring your debt to make it more manageable. 

Did you make any investments this year? What is the return on your stock, bond, or mutual fund investments? Are you satisfied with their performance or is it time to make some changes? A diversified portfolio that consists of some cash, stocks, bonds, and property will help to spread your risk. Adjust your portfolio to ensure that your asset allocation is appropriate to your short, medium and long term needs.

Your age, family situation, health, and goals will influence the level of risk you can tolerate and the level of insurance you take on. Are you well protected if something untoward happens in the coming year? Review your insurance cover to determine what changes might be required for the coming year.

Do you have a will, a trust or some other estate planning vehicle in place that could protect your loved ones in the event of your incapacity or demise? If you do, when last did you review it? Does your will still fairly reflect your personal wishes for the distribution of your assets? Have your personal or financial circumstances or your beneficiaries significantly changed over the past year? Keep your will up to date and make sure that key people know where it is.

Just as an annual medical check-up helps you to be proactive about identifying potential problems before they fester and become real problems, also an annual review of your finances throw up areas of concern so that you can begin to pay some attention to these before they seriously jeopardise your financial security. No matter how busy you are, take just a few hours out of this holiday period to focus on your finances. It is important and you will feel more in control of your financial life as you enter 2023.