2021 Annual Financial Checklist | How To Give Yourself A Financial Checkup

2021 Annual Financial Checklist | How To Give Yourself A Financial Checkup

A lot has changed over the past year and that means your financial strategies probably need some adjustments, too. You work hard for your money, so you owe it to yourself to spend a little time revamping your finances.

Whether your finances requires an extreme makeover or a simple fine tuning, this easy 11-Step Annual Financial Checklist will help you give yourself a financial checkup this year.

Going through an annual financial checklist may not be the most exciting thing you can think of to do, but it’s likely one of the most financially rewarding things you will do this year. This checklist can help you optimize your finances, so you can give your savings a major boost.

So let’s get started with this annual financial checklist, shall we? Here are my top tips for how to give your finances a frugal makeover.

2021 Annual Financial Checklist

#1: Give Your Budget a Tune-Up

Have you looked at your budget lately? And I mean have you really closely looked at it? To know how you’re really doing financially, you’ll want to make sure your monthly budget is up-to-date.

Things change throughout the year and our budgets need to reflect that. So take a few minutes today to review your budget to make sure it includes all of your current income and expenses. You’ll also want to make sure it accurately reflects how much you’re spending on each item.

For example, if you have noticed you have started spending too much on groceries and find that category of your budget spiraling out of control, it’s time to get serious about finding new ways to cut food costs. Go check out my favorite tips for How To Cut Your Grocery Bill to help you save more on your groceries, too.

In addition to groceries, it’s important to review the rest of your budget to make sure you’re not overspending in other categories as well.

Whether it’s electricity or internet service, bills can often go up throughout the year and we’re just too busy to do anything about it. So take some time this week to look for better rates and find new ways to save money.

Maybe this would be switching to a super-saver electricity plan, changing cell phone providers, or finding a less expensive internet plan. What I’m saying is, it’s time to tackle cost creep in the budget head-on.

After all, the best way to push back on rising prices is to shop around for better deals, right? We work hard for our money. So we should also work hard to keep as much of it as possible in our accounts.

#2: Look For Ways To Save On Insurance

When it comes to monthly budgets insurance is such an important part. However, it’s easy to overpay on insurance, too.

For example, you’re likely overpaying for some part of your health insurance, homeowner’s or rental insurance, car insurance, or life insurance.

I recently spoke with my insurance agent and was able to review every line of our various insurance items to make sure I was getting the best deal and not overpaying for anything I wouldn’t use.

In fact, my agent can expect a call from me anytime I receive a premium increase. Just because they want to raise rates, doesn’t mean you need to pay more. You may be able to finesse your policy with some minor adjustments and drop unnecessary coverages to prevent a rate increase.

If your insurance provider is unwilling to provide you with the rates you are looking for it is time to shop for another insurance provider. Shopping around for less expensive insurance does take some time, but it makes a significant difference in your annual savings.

Earlier this year, our car insurance provider would not negotiate the rate increase so I switched to another company and ended up saving roughly $50 a month or $600 a year. This may not sound like much, but it adds up quickly.

#3: Cut Out Your Unnecessary Expenses

Now that you’ve updated your budget and lowered your insurance costs, it’s time to cut out all of your unnecessary expenses.

It is so easy for expenses to creep into your monthly spending. This includes things like that cable bill (when you already have streaming), old subscription box, or gym membership you don’t even use anymore. Just like cleaning your home, it’s time to clean up your expenses. So analyze every expense and get rid of as many of your monthly bills as possible.

You’ll be surprised how exciting it is to cut your expenses. To start, you’ll get the satisfaction of knowing you’re not wasting your hard earned money anymore. Also, cutting your unnecessary expenses is the easiest and least painful way to boost your monthly savings.

#4: Prepare For The Unexpected

Wouldn’t it feel great to have a buffer between you and the curve balls life throws at you—a cushion that helps you sleep soundly because it turns a major life crisis into just a slight inconvenience?

Even if your AC goes on the fritz in mid-July, you’re cool as can be. Why? Because you had your safety net in place. I am talking about an Emergency Fund.

The reason to have an emergency fund is simple: You don’t know what’s going to happen.

No one wants to live at the mercy of life’s twists and turns. Your emergency fund will come in handy if you suddenly lose your job or your HVAC breaks in the dead of winter. Do not let yourself be caught off guard. You need that safety net between you and life.

#5: Update Your Savings Goals

Your budget is up-to-date, you’ve lowered your insurance, you’ve cut unnecessary expenses, and you’ve started an emergency fund. Way to go!

Now it’s a really good idea to sit down and review your savings goals. I like to do this at least once per year, and sometimes even more often.

Have you noticed how easy it is for some of your long term goals to get completely skipped over? Short term needs and wants have a way of grabbing all of our attention… and money! That’s why we need to regularly evaluate whether or not we are properly saving enough for both short and long term savings goals.

You can start by making a list of what you want to save for. This could include saving for your next car, annual vacations, a new home, college, and of course retirement. Then decide how much of your monthly savings should be given to each item (also referred to as sinking funds).

I have an easy method that I personally use to make sure I’m saving enough towards each of my savings goals. For each item I want to save for, I simply allocate a percentage of my monthly savings.

Here’s an example of what that can look like:

  • 50% – Retirement Savings
  • 20% – College Savings
  • 10% – Used Car Savings
  • 10% – Home Repairs & Maintenance
  • 5% – Medical & Dental Savings
  • 5% – Vacation Savings

At the end of the month after all of your expenses have been paid, anything leftover can go to savings. Say you save an extra $1,000 this month. At the end of the month you’ll simply divide up your money using the percentages you’ve created {like the ones above}, and start funding each category.

For example, $500 would go towards retirement, $200 would go towards college, $100 towards car, $100 towards home maintenance, $50 towards medical, and $50 towards vacations. Having a percentage system ensures that no savings categories that are important will ever get left out.

Even if money is tight, you’d be surprised by how much money you can actually save.

#6: Supercharge Your Retirement Savings

We all know it’s important to save for retirement. Unfortunately, nearly half of Americans aren’t saving for retirement and those who are saving do not save enough. That’s a problem.

The good news is that people are at least thinking about it. In fact, 49% of Americans said saving money was one of their New Year’s resolutions for 2020. That’s right up there with eating healthier and getting more exercise as the most popular resolutions.

But wishing without action is just a pipe dream. You have to do something different if you want your habits—and your future—to change. And the truth is, saving for retirement is easier than you think.

We’re going to cover three steps:

  • Set a Goal for Your Retirement Savings
  • Invest at least 15% of Your Income Into Tax-Advantaged Accounts Like a 401(k) or an IRA

If you are thinking you do not have enough to save, why not start with simply $40 a day. I wrote an article of how you can retire early with just $40 a day and it is choke full of tips and tricks.

#7: Update Your Will

In addition to saving for retirement, it is essential to have a current will in place. If you don’t have a will and you pass away, there is a risk of the government deciding how to distribute your assets. If you have minor children the consequences of not having a will are even greater.

The good news is creating a will is very easy and costs nothing.

I personally got my will for free from FreeWill. You simply create an account, answer a few questions, and they will generate a will for you at no cost.

There are other free and inexpensive tools available online. Just make sure you educate yourself about the specific will requirements for your state. For example, it’s common for a state to require that your will be notarized.

#8: Earn More Interest On Your Money

It’s time to let your money work for you and that is why one of the to-do items on our Annual Financial Checklist is to make sure you are earning enough interest on your money.

Interest rates have changed a lot over the past year and that means it’s a great time to shop around to make sure you’re earning as much as possible on your savings.

I opened a savings account to hold our emergency fund that had an interest rate of 2% when I opened it. Today, it is barely 0.5%. I did a bit of shopping and transferred all of our money into another bank that is giving is giving us almost 5 times our previous rate.

To know you’re getting the best rates, I recommend checking rates at a variety of different government insured financial institutions. These could include your current bank, credit unions, and online money market accounts. Also, don’t forget about short term CD’s and bonds.

#9: Balance Your Investment Portfolio

It’s really common for your higher growth investments to outperform the rest of your investments, leaving you with too much risk in your investment portfolio. Or maybe you’re just less comfortable having riskier investments now than you used to be.

Only you can determine how much risk you feel comfortable with. If you are thinking about making some changes, I first recommend speaking with your financial planner.

However, if you don’t have an advisor and would like some tips, I wrote an in-depth article on How to Invest with a beginner’s guide to investing in the stock market.

#10: Clean Up Your Credit

No Annual Financial Checklist would be complete without a review of your credit.

Did you know good credit may help you save money on your cell phone bill and car insurance? It may also help you score a better rate on your next car loan or home mortgage.

It’s really easy to get a copy of your credit report. You can request a free copy from AnnualCreditReport.com.  

When reviewing your credit report, check for any errors in your credit history or personal information.  Also check to see if there are any negative items being reported.  

Did you find any problems or incorrect information on your credit report?  Don’t worry, this is common and there are some really helpful tools available from CreditRepair.com to help clean up your credit score.

They will help make sure items in your credit report are substantiated, relevant, accurate and reported fairly.  If items in your credit history are incorrect, they will work hard with you to get them corrected and to defend your financial reputation.

Related post: How To Improve Your Credit Score | Step By Step

#11: Tackle Your Debt

If you have debt, make it a goal this year to tackle your debt head on and pay it off as quickly as possible.

Attacking your debt with intensity will get you on the road to financial freedom and allow you to build wealth faster than any debt reduction company ever will. No, it’s not easy. And it’s not quick. But it is worth it!

My husband and I paid off more than $60,000 of debt in 18 months. The road to debt free was not easy. We had lots of bumps along the way and unexpected major expenses such as needing a new car. We still hustled and eventually paid off every penny.

You are ultimately the only one responsible for your debt. It’s up to you to roll up your sleeves, change your spending habits, make a plan for your money, and take action.

Final Thoughts

Congratulations, you did it! You’ve officially made it through the annual financial checklist!

Many of the tips I’ve shared in this checklist comes from my own personal experiences. I hope these ideas will help you take charge of your finances and keep you on track to achieving your financial dreams one step at a time.

If you still have questions about how to give your finances a makeover, it’s always a great idea to give your licensed financial advisor or your accountant a call.

It’s the perfect time to start taking steps to make this year your most financially rewarding ever! Let’s do this!

What do you have on your annual financial checklist that has helped you?

3 thoughts on “2021 Annual Financial Checklist | How To Give Yourself A Financial Checkup

  1. Similar to you, I had my emergency fund savings in a high yield savings account that earned around 2.2% APY when I opened it. Now it’s at 0.5%, which is painful. It is challenging right now to save with liquidity, while also fending off inflation, which I believe is a lot higher than documented by the CPI.

    Liked by 1 person

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