Reviewing your yearly budget is one of the key parts of improving spending habits and becoming more accurate with your financial predictions for the future. And although a budget should be looked at regularly, finalising finances at the end of every year allows you to see the bigger picture when it comes to the highs and lows of your money.
When looking over your yearly expenditure and income, there are several areas to keep an eye on to ensure you’re staying on top of your finances and not missing major discrepancies in your accounts. So, here are the big questions to ask when delving into your end-of-year budget.
The first step in forming a budget is creating ambitious yet realistic goals for your money. Whether it be a certain percentage increase, breaking even or reducing debts, these big-picture goals can be close to impossible to track on a month-to-month basis, which is why an annual review is so important.
Evaluating how your year went is vital for adjusting your new year financial goals to either make up for lost money or to allow yourself a larger spending margin thanks to a year of positive money outcomes. It also allows you to review whether your original goals were too ambitious or if they could have been more generous and gives you the opportunity to become more realistic and accurate in the following year.
Seeing fluctuations in your accounts over a 12 month period lets you understand exactly when and where you are splashing the most cash, as well as those lucky months where you feel as though you are living lavish.
Significant dips in accounts can come when multiple bills are due, around Christmas time, tax time or during trips away. Figuring out when these regular lows occur throughout the year will allow you to have some foresight when it comes to preparation through managing your money more closely in the months leading up to it.
Making cuts and finalising payments are some of the most financially relieving things you can do for your money. Looking at the overview of an account to see which bills are no longer necessary or which debts can be paid off in the first few months of the new year will allow you a bit more wriggle room to reach your financial goals throughout the year.
It’s also worth looking at your bank statements in detail as it’s painfully easy to forget about some smaller accounts that regularly deduct money despite no longer using the service. These can include memberships, online subscriptions or app payments.
Looking at your final budget in comparison with the previous year will show you where your improved areas are and where are you didn’t fare so well. Understanding patterns in spending habits can be helpful for the future when it comes to figuring out where you spent the most unnecessary money or locating a problem area from the previous year that is yet to improve.
Completing a comparison can also prove useful if certain changes to payments or accounts ended up being beneficial or detrimental to your overall financial wellbeing. This can include switching service providers, starting to use a financial advisor or changing budgeting strategies.
Whether it be a five or ten year plan, often we budget for a specific term. When this term is up, data from this set amount of time is the key to creating a new budget with improved goals that address your problem areas and push you towards healthier money saving habits.
As your lifestyle changes, so should your budget – particularly for those heading towards retirement or in receipt of the Age Pension. When entering a new stage of life don’t forget that regularly reviewing and adjusting your annual budget is one of the most important parts for giving your hard-earned money the longevity it deserves.
Important information: The information provided on this website is of a general nature and for information purposes only. It does not take into account your objectives, financial situation or needs. It is not financial product advice and must not be relied upon as such. Before making any financial decision you should determine whether the information is appropriate in terms of your particular circumstances and seek advice from an independent licensed financial services professional.