How do you tell if you’ve made financial progress? Well, you guessed right: by carrying out a thorough financial review.
A financial review is an activity that helps you examine the financial goals you set at the beginning of a said time period like, say, a year, to see if those goals were achieved or not.
One of the key ways to maintain a healthy financial life is by conducting periodic financial reviews, especially on an annual basis. One of the major perks of conducting a financial review is that you no longer assume or speculate on how things went, rather, you now have a proper and clear understanding of your progress and areas of improvement for the new year.
So how do you conduct a financial review? Here are the key areas of your finances you should be looking at:
- Budget: Did you live by your budget in 2021??? That budget that you painstakingly drew at the beginning of the year did you see it through?? Okay we’re no longer shouting, but for real, living by a monthly budget is so important and cannot be overemphasized. Here’s a fun activity for you, compare your actual spending in 2021 on a monthly basis with the budget you created, and see if you had a budget deficit (over spent) or budget surplus (under spent). A “candy” for anyone with a budget surplus with proof of course!!
- Income Streams: How many streams of income did you unlock in 2021? If having multiple streams of income was a goal you had at the beginning of the year then you need to review your income/bank statements to see if you met that goal. If you didn’t, start to make concrete plans to help you achieve it in 2022.
- Savings and Emergency Fund: Your savings is simply the fraction of your income/earnings set aside for future purposes and your emergency fund is a portion of your savings set aside to handle any emergencies that may arise. Did you have a savings and emergency fund goal for last year? Did you meet that goal? These are the questions you need to answer in your financial review process.
- Investment portfolio: If you’re part of the #FLAFam (*wink wink*), by now you know that saving money is not enough, you also have to be investing your money on a daily and diversifying your investments across different assets and currencies, so as to build wealth and generate attractive returns that beat inflation. So how did you do with your investment goal for 2021?? Did you invest your money or you blew it?? Don’t tell me, answer your conscience.
- Charity: Finally, Charity is so important and giving back to people and causes that you care about is always a great idea. As much as we make goals on how to be wealthy, it’s also good to have charity-based goals and fun fact; the richest people in the world are major givers, so that tells you something. If you did not have a giving goal in 2021, it’s not too late to change that, this year, pledge to give in your own little way to someone in need, you’d be glad you did.
By answering the above questions (truthfully!), you now have a clearer picture on the state of your finances which would help you as you plan for 2022. If after these activity, you observed that you made significant progress with your 2021 financial goals, cheers to you!! If no, no worries, it’s never too late to get back on the right path.
Here’s how: as you go into 2022, you need to be proactive with ensuring that you have created a system to keep you aware and accountable to your financial goals. Your goals need to be tailored around the five areas mentioned above:
- Sticking to a budget
- Growing your income
- Building your savings and ensuring that you set aside an emergency fund
- Diversifying your investment portfolio across various assets like mutual funds, stocks, bonds, real estate, agricultures, startups and cryptocurrencies.
- Giving to charitable causes.
After setting your goals, they also need to be broken down into quarterly, monthly, weekly and daily activities to ensure that you’re being deliberate and intentional with meeting these goals. Most importantly, ensure that you’re tracking your progress on a monthly basis and don’t forget to reward yourself when you meet those goals!
Have a productive and financially rewarding 2022!