How to make a yearly financial review and plan for the next year

Understanding the Importance of a Yearly Financial Review

Engaging in a yearly financial review is a crucial step for anyone aiming to gain mastery over their financial situation. This comprehensive examination serves as a reflection on the financial successes and challenges experienced over the past year. By undertaking this reflective exercise, individuals can identify trends, learn from their financial behaviors, and establish actionable objectives for the upcoming year. Such preparation not only aids in fostering a conscious awareness of spending habits but also enhances your overall financial resilience.

Steps to Conduct a Effective Financial Review

To ensure that your financial review is both manageable and productive, consider following these organized steps:

• Gather financial statements: Start by collecting all relevant documents such as income statements, bank statements, and a comprehensive record of your expenses for the year. This includes pay slips, tax returns, and any investment records. For instance, if you invested in KiwiSaver, gather your annual statement to get an overview of your contributions and growth.
• Assess your spending: Next, categorize your expenses to better understand where your money is allocated. Break down your spending into essential categories like housing, food, utilities, and discretionary spending such as entertainment. This can help illuminate areas where you might cut back. For example, if you discover that a significant portion of your budget goes towards dining out, consider cooking at home more frequently to save money.
• Evaluate your savings: Take a closer look at your savings rates regarding emergency funds, retirement accounts, and any specific savings goals, such as a holiday or home deposit. Are you achieving a savings rate of at least 10% of your income? If not, consider setting up automatic transfers to savings accounts to help you reach your targets more reliably.
• Review your debts: List all existing debts, including personal loans, credit cards, and student loans. This will help you understand your total liabilities and track your repayment progress. For instance, you may prioritize paying off high-interest credit card debt first, as it typically costs you more in the long run.

Planning for the Future

After completing your review, the next step is to plan for the upcoming year. Setting clear, achievable financial goals based on your findings will create a pathway to actualize your financial aspirations. Whether you aim to save for a major purchase like a vehicle, reduce debt, or allocate more funds into investments, your plan should be structured and realistic. For example, if your goal is to buy a home, consider setting a specific savings goal for your deposit and outline the monthly contributions needed to reach that goal within your desired timeframe.

As you embark on your financial journey, keep in mind that consistent tracking and adjustment of your goals will be necessary. Each year, revisit this process, refining your strategies to adapt to life changes or shifting priorities. In the sections that follow, we will further examine each step, providing practical examples and tips tailored to the financial landscape in New Zealand, ensuring you can make informed and confident financial decisions.

Steps to Conduct an Effective Financial Review

To ensure that your financial review is both manageable and productive, consider following these organized steps:

• Gather financial statements: Start by collecting all relevant documents such as income statements, bank statements, and a comprehensive record of your expenses for the year. This includes pay slips, tax returns, and any investment records. For instance, if you invested in KiwiSaver, gather your annual statement to get an overview of your contributions and growth.
• Assess your spending: Next, categorize your expenses to better understand where your money is allocated. Break down your spending into essential categories like housing, food, utilities, and discretionary spending such as entertainment. This can help illuminate areas where you might cut back. For example, if you discover that a significant portion of your budget goes towards dining out, consider cooking at home more frequently to save money.
• Evaluate your savings: Take a closer look at your savings rates regarding emergency funds, retirement accounts, and any specific savings goals, such as a holiday or home deposit. Are you achieving a savings rate of at least 10% of your income? If not, consider setting up automatic transfers to savings accounts to help you reach your targets more reliably. A goal of building an emergency fund with three to six months’ worth of living expenses is often recommended to enhance your financial security.
• Review your debts: List all existing debts, including personal loans, credit cards, and student loans. This will help you understand your total liabilities and track your repayment progress. For instance, focus on paying off high-interest credit card debt first, as it typically costs you more in the long run. Identifying the snowball or avalanche method can also assist in structuring your repayments effectively.

Planning for the Future

After completing your review, the next step is to plan for the upcoming year. Setting clear, achievable financial goals based on your findings will create a pathway to actualize your financial aspirations. Whether you aim to save for a major purchase like a vehicle, reduce debt, or allocate more funds into investments, your plan should be structured and realistic. For example, if your goal is to buy a home, consider setting a specific savings goal for your deposit and outline the monthly contributions needed to reach that goal within your desired timeframe.

As you embark on your financial journey, keep in mind that consistent tracking and adjustment of your goals will be necessary. Each year, revisit this process, refining your strategies to adapt to life changes or shifting priorities. In the sections that follow, we will further examine each step, providing practical examples and tips tailored to the financial landscape in New Zealand, ensuring you can make informed and confident financial decisions.

Setting Financial Goals and Creating a Budget

Once you have a clear understanding of your current financial situation, it’s time to set specific goals for the year ahead. Clear goals provide direction and motivation in your financial management. Start by identifying what you want to achieve. Would you like to save for a large purchase, such as a car or a holiday? Or perhaps your focus is on eliminating debt or increasing your retirement savings.

SMART goals are a helpful framework for setting these objectives: they should be Specific, Measurable, Achievable, Relevant, and Time-bound. For example, instead of stating, “I want to save money,” a SMART goal would be, “I want to save $5,000 for a home deposit within 12 months.” This level of clarity helps you maintain focus and measure your progress along the way.

Creating a Budget

With your goals in place, the next step is to create a budget that aligns your spending with these objectives. A budget is essentially a spending plan that outlines how much money you have coming in and how much you plan to spend in various categories. You can maintain a simple budget using a spreadsheet or explore budgeting apps that are available in New Zealand, like Pocketbook or YNAB (You Need A Budget).

To create your budget, follow these steps:

• Calculate your income: Start with a clear picture of your total income, including wages, bonuses, and any additional income streams, such as rental income or investment earnings. Be sure to consider tax implications as well, as these can affect your overall take-home pay.
• List fixed and variable expenses: Fixed expenses are regular payments that remain largely constant, such as rent or mortgage repayments, insurance premiums, and subscription services. Variable expenses fluctuate, including groceries, entertainment, and dining out. Allocate a reasonable amount for each category based on historical spending while keeping your goals in mind.
• Incorporate savings into your budget: Treat savings as a non-negotiable expense. Allocate a percentage of your income to your savings goal before distributing the remainder across other expenses. This approach helps you prioritize saving and avoid spending your entire income.
• Regularly review your budget: Commit to monthly check-ins to ensure you’re staying on track with your spending and savings. Adjust your budget as necessary—life circumstances can change, and your budget should be flexible enough to adapt.

Consider Consulting a Financial Advisor

For those feeling overwhelmed by the complexities of managing finances, consider seeking professional guidance. A financial advisor can provide personalized strategies that suit your specific goals, assist you with investing, and help optimize your overall financial health. Look for advisors registered with the Financial Markets Authority in New Zealand to ensure professional standards and accountability.

Having a structured plan and a clear understanding of your finances puts you in a better position to achieve your financial goals. By establishing a realistic budget and adhering to it, you will be on the path to financial stability and success. Remember, the key is not only to set goals but also to actively work towards them, making adjustments as needed along the way.

Wrapping Up Your Financial Review and Plan

As you conclude your yearly financial review, it’s important to reflect on the key steps you’ve taken to build a robust financial foundation. Assessing your current financial situation, including income and expenses, sets the stage for the next year. By clearly defining your financial goals using the SMART criteria—ensuring they are Specific, Measurable, Achievable, Relevant, and Time-bound—you can create a focused roadmap that directs your efforts and decisions.

Developing a practical budget is essential in this process. A well-structured budget helps to align your spending habits with your financial goals, allowing you to identify areas where you can cut back and save more effectively. Remember, the aim is not just to restrain spending but rather to invest in your future by prioritising savings.

Consider integrating regular evaluations of your financial plan throughout the year. Staying vigilant will enable you to adjust your budget and goals as your circumstances change, whether that means a new job opportunity or unexpected expenses. Furthermore, if you feel uncertain at any point, don’t hesitate to reach out to a financial advisor who can offer tailored guidance and insights.

Ultimately, the journey toward financial well-being is ongoing. By regularly reviewing your finances and adapting your plan as necessary, you will cultivate a sense of empowerment and control over your financial future. Embrace the process, celebrate your successes, and remain committed to your goals for the coming year. Financial mastery is not a destination, but a journey—one step at a time.

Linda Carter

Linda Carter is a writer and financial expert specializing in personal finance and financial planning. With extensive experience helping individuals achieve financial stability and make informed decisions, Linda shares her knowledge on the our platform. Her goal is to empower readers with practical advice and strategies for financial success.