Disclaimer! Patton Wealth is NOT a tax advisor, does not provide tax advice, and the following is NOT meant to be advice but for information purposes only. For any tax questions or issues, we encourage you to contact a tax advisor.

As the year draws to a close, it's an ideal time to pause and reflect on your financial progress. Conducting a year-end financial review provides a clear snapshot of where you stand financially, helps identify areas for improvement, and sets the stage for a successful new year. Here's a step-by-step guide to help you assess your progress effectively.

1. Review Your Financial Goals

Start by revisiting the financial goals you set at the beginning of the year. Were you aiming to pay off debt, save for a down payment, or invest a specific amount? Compare your actual results against these objectives.

Key Questions to Ask:

• Did you meet your savings and investment targets?
• Were there unexpected challenges or windfalls that affected your progress?
• Have your priorities changed?

Tracking progress against clear goals is essential for staying on course. If you haven’t set measurable goals, this review can guide you in creating them for the upcoming year.

2. Evaluate Your Income and Expenses

Understanding where your money is coming from and where it’s going is crucial. Review your income streams, including salaries, side hustles, and investments, as well as your spending habits.

Steps to Take:

• Categorize expenses: fixed (e.g., rent/mortgage) and variable (e.g., entertainment).
• Identify patterns or areas of overspending.
• Calculate your savings rate: What percentage of your income is saved or invested?

Use tools like budgeting apps or spreadsheets to make this process easier. If you consistently exceeded your budget, explore adjustments to align spending with your goals.

3. Check Your Debt Status

Debt management is a cornerstone of financial health. Take inventory of all debts, including credit cards, student loans, and mortgages.

Action Points:

• List outstanding balances, interest rates, and monthly payments.
• Assess whether you’re meeting or exceeding payment schedules.
• Consider strategies to accelerate debt repayment, such as the snowball or avalanche method.

Reducing high-interest debt should remain a priority to free up resources for savings and investments.

4. Review Your Investments

Investments play a vital role in building long-term wealth. Assess the performance of your portfolio to ensure it aligns with your risk tolerance and financial objectives.

Key Areas to Review:

• Asset allocation: Is your portfolio diversified across stocks, bonds, and other asset classes?
• Returns: Compare your returns against benchmarks or indices.
• Fees: Are high fees eating into your investment gains?

Consulting a financial advisor can provide personalized insights and strategies for optimizing your portfolio.

5. Reassess Your Emergency Fund

An emergency fund provides a financial cushion for unexpected expenses. The standard recommendation is to save three to six months’ worth of living expenses, though this may vary based on your circumstances.

Questions to Consider:

• Does your current fund cover your essential expenses?
• Have you had to dip into your emergency savings this year?
• Should you increase the fund based on changes in income or expenses?

Replenish and grow your emergency savings if needed to ensure financial security.

6. Examine Your Credit Report and Score

Your credit score affects your ability to borrow money, rent property, and secure favorable interest rates. Reviewing your credit report ensures accuracy and alerts you to potential issues.

Steps to Take:

• Obtain free credit reports from major bureaus like Experian, Equifax, and TransUnion.
• Look for errors or unfamiliar accounts that may indicate fraud.
• Aim to improve your credit score by paying bills on time, reducing credit utilization, and avoiding unnecessary credit inquiries.

7. Plan for Taxes

Year-end tax planning can save you money and prevent surprises during tax season.

Consider the Following:

• Maximize tax-advantaged accounts like IRAs or 401(k)s.
• Review deductions and credits you’re eligible for, such as charitable contributions or education expenses.
• Consult a tax professional to identify additional opportunities for tax savings.

8. Set Financial Goals for the New Year

After assessing your progress, use your findings to establish new or updated goals for the upcoming year. Ensure these goals are SMART: Specific, Measurable, Achievable, Relevant, and Time-bound.

Examples of Goals:

• Increase your savings rate by 5%.
• Pay off $10,000 in debt.
• Invest in a new asset class, such as real estate or index funds.

Break larger goals into smaller, actionable steps to make them more manageable and trackable.

9. Create or Update Your Budget

A budget is the roadmap for achieving financial goals. Adjust your budget to reflect lessons learned from this year’s review.

Tips for an Effective Budget:

• Use a zero-based approach, assigning every dollar a purpose.
• Prioritize needs over wants.
• Include a buffer for unexpected expenses.

Review your budget regularly to ensure it aligns with your evolving financial situation.

10. Celebrate Your Wins

Finally, acknowledge and celebrate your financial achievements, no matter how small. Progress is progress, and recognizing it will motivate you to keep pushing forward.

Reflection Questions:

• What did you do well this year?
• Which habits contributed to your success?
• How can you build on this momentum next year?

Final Thoughts

A year-end financial review is more than just numbers—it’s about understanding your financial journey and preparing for the future. By assessing your progress, addressing gaps, and setting new goals, you’ll enter the new year with clarity and confidence. Start today, and make the upcoming year your most financially successful yet!

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. Any specific securities or investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own situation before making any investment decision including whether to retain an investment adviser.

All expressions of opinion are subject to change without notice in reaction to shifting market, economic or political conditions.  Data contained herein from third party providers is obtained from what are considered reliable sources. However, its accuracy, completeness or reliability cannot be guaranteed. This content was created as of the specific date indicated and reflects the author’s views as of that date. Supporting documentation for any claims or statistical information is available upon request.

Past performance is no guarantee of future results.  Any comments about the performance of securities, markets, or indexes and any opinions presented are not to be viewed as indicators of future performance.

Investing involves risk including loss of principal.

Indexes are unmanaged, do not incur management fees, costs and expenses, and cannot be invested in directly. For more information on specific indexes please see full disclosure here.

Any charts, tables, forecasts, etc. contained herein are for illustrative purposes only, may be based upon proprietary research, and are developed through analysis of historical public data.

All corporate names shown above are for illustrative purposes only and are NOT recommendations.

International investments involve additional risks, which include differences in financial accounting standards, currency fluctuations, geopolitical risk, foreign taxes and regulations, and the potential for illiquid markets. Investing in emerging markets may accentuate these risks.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed-income investments are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications and other factors. Lower-rated securities are subject to greater credit risk, default risk, and liquidity risk.