“New year, new me!” We cite this mantra each and every year with the goal of improving our lives. How about your finances?
Reviewing your finances each year helps ensure that you are financially healthy and living within your means.
Review Last Year’s Finances
Last year, did you meet your financial goals or was there room to improve? Review your expenses and categorize them to help you visualize where your money went:
- Mortgage, insurance, property taxes (including escrow)
- Home maintenance and repair
- HOA dues, if applicable
- Household expenses
- Entertainment expenses
Ask yourself if there is room to improve and lower costs like utilities and entertainment. The Consumer Financial Protection Bureau has an easy-to-use tool to help you review and build your budget.
Calculate Your Net Worth
Next, you’re going to want to calculate your net worth. Net worth is the value of the assets you own minus liabilities and can provide a valuable snapshot about your current financial situation. You can calculate your net worth with this equation:
Tangible Net Worth = Total Assets – Liabilities – Intangible Assets
Revisit Your Savings Accounts
Now is also the time to revisit your savings accounts, retirement funds, and other assets. If you got extra money over the holidays, consider adding it to your savings for a rainy day. If you have retirement savings, like a 401(k), consider talking to your agent about upping the amount contributed each paycheck. Remember to make sure that you can afford to do so beforehand!
Set New Goals
Now that you’ve reviewed your spending and savings, and calculated your net worth, it’s time to set new financial goals for the year. Remember to set small goals instead of one big goal, as they are often more realistic and easier to obtain. For example, a goal could be “Add $100 to my savings each paycheck.”
With a solid home budget and taking advantage of things like tax breaks, you may see significant savings throughout the year. With this extra money, you can be prepared for whatever comes your way—be it an emergency, a much-needed vacation, or even a new home!
If a new home is on your mind, trust the experts at Merchant of Homes to get you into the home of your dreams!