Year-end finances made simple
Young couple high-fiving as they do a financial review

As the end of the year approaches, it’s a good time to look back at your finances. Although you may not have achieved all of your goals for the year, there’s no need to get upset with yourself. Instead, reflect on what’s happened, learn from your mistakes, and see if you can adjust next year. With these tips, your year-end finances will be made simple.

Budget for the holidays

Before you get ahead of yourself, the first thing you need to do is budget for the holidays. Even though the holidays happen at the same time every year, many people are still caught off guard regarding expenses. Not only will you be buying presents, but the odds are you’ll be eating out and seeing friends more. That means you’ll be spending additional funds that you might not have accounted for.

To avoid going into the new year with debt, set aside some money now for all the fun you’ll be having in December. Better yet, set up an automatic transfer each month to your savings account that’s dedicated to the holidays. By doing this, you’ll have money available every year.

Review your financial goals

The end of the year is obviously the best time to review any financial goals that you made at the start of the year. There’s a chance that you didn’t quite reach your goals; don’t stress out about this too much, as the odds are, you’re not alone. Many people make financial goals but don’t have an actionable plan to achieve them. 

If this sounds like you, then think about what your goals will be for the next year. Instead of saying you want to save more money, how about telling yourself you want to save $50 each paycheque? This gives you a reasonable goal that you can work towards. 

Now let’s say you did achieve your financial goals this year – this is a good time to think about next year’s goals. Ask yourself if you can improve on your success, or if there’s a more ambitious goal that you think you can reach. 

Evaluate your income and expenses

Sometime in the last year, your income may have increased. In addition, your expenses may have fluctuated. That raise may have appeared good at the time, but if inflation has increased your overall spending, your savings rate may be down. With income and expenses constantly fluctuating, it’s time to see how things have affected your bottom line.

Now would be a good time to redo or update your budget. Although many of your expenses are likely the same, you’ll want to look at things such as groceries, entertainment, and your mortgage (if you’re on a variable-rate mortgage). You’ll want to ensure that your current budget is accurate, as that will help you visualize how much you’re spending and saving.

Plan for the new year

After reviewing your financial goals and updating your budget, you can start to plan for the new year. Consider any major expenses that you may have coming up. That could be a wedding, a trip, new appliances, and so on. If you know those big ticket items will cost you eventually, build them into your budget if you haven’t done so already.

Once you have everything written out, you may realize that you simply don’t have the funds to cover your anticipated expenses. If this is the case, you may need to delay some spending or cut back on other areas.

Assess your investment performance

Obsessing over your investment performance is never a good idea, but it does make sense to review it at the end of the year. In an ideal world, the value of your investments would have gone up. However, there will always be down years. Even if your investments haven’t performed well, that doesn’t mean you should immediately make a switch. 

When it comes to investing, you need to think about why you’re investing and what your goals are. For example, someone who plans on buying a home in the next year will have a much different investment strategy compared to someone who’s looking to maximize their Tax-Free Savings Account.

Ask yourself if your current investments still match your profile and goals. If the answer is yes, then there’s no need to make a change regardless of the performance. That said, making a switch might make sense if you have other reasons, such as you want to lower your overall costs.

The bottom line

It’s always worthwhile to review your year-end finances, but it’s not worth getting upset over. You essentially want to look at what your goals were and how you performed the previous year. If you didn’t reach your goals, ask yourself if you put yourself in a position to win in the first place. For many people, a year-end financial review is more about making adjustments for the new year rather than having regrets or focusing on what-ifs.

Barry Choi is a Toronto-based personal finance and travel expert who frequently makes media appearances. His blog Money We Have is one of Canada’s most trusted sources when it comes to money and travel. As a completely self-taught, do-it-yourself investor with no formal training, he makes money easy to understand for all Canadians. His specialties include personal finance, budget travel, millennial money, credit cards, and trending destinations.

Barry Choi is a paid spokesperson of Sonnet Insurance.