Its holiday season right, may be you are in a mood of a pause and you only want enjoy time with your loved ones, I understand, but let me tell, this is also a great time to take self-assessment on your short and long term goals, it’s important to take yourself out for a date, I mean you, your notebook, laptop (if you have) have a me time only.
As we wrap up this year , it’s time to pause, take stock, and review the progress made in your financial journey. Conducting an annual personal financial review is not just a reflective moment, it’s an important step in ensuring your financial health, setting future goals, and staying on track for long-term success.
Here are my favorite three steps I always follow on how you can conduct a comprehensive financial review and plan for a prosperous upcoming year. This is a long post but take time to read to the end its worth it, I promise you.
- Financial Review: Assessing the Numbers
Your financial review should start with a deep dive into four important numbers:-
Income
- Review your total income for the year from all sources employment, side hustles, investments, and passive income streams.
- Compare it to previous years to identify trends or changes.
- Did your income grow, stagnate, or decrease?
- Reflect on opportunities to boost your income for upcoming year This could involve pursuing promotions, expanding side hustles, or investing in skill development.
Liabilities
- List all your liabilities, including loans, credit card balances, and other debts.
- Assess your repayment progress: Did you reduce your debt this year? If not, what challenges held you back?
- Calculate your debt-to-income ratio and identify areas where you can accelerate repayments in the coming year.
Savings Rate
- Assess your savings rate by dividing the amount you saved or invested by your total income.
- Reflect on whether your savings rate aligns with your financial goals.
- I often recommend saving at least 20-30% of your income.
- Identify any unnecessary expenses that may have impacted your savings and consider ways to optimize spending in the new year
Net Worth
Most people think Net worth is for rich people like Mo-Dewji, Bakheresa or Jeff Bezo or Dangote, let me tell you need to assess your net worth every quarter to understand your personal balance sheet position so here is how:
- Calculate your net worth by subtracting your liabilities(Madeni) from your total assets (cash, investments, Vikoba,Saccos contributions, pension saving, stocks, properties, etc.).
- Evaluate how much your net worth has grown over the year.
- Set a target net worth for the end of upcoming year and outline strategies to achieve it, such as increasing investments or reducing debt.
It can be overwhelming sometimes especially if you are alone and new in this journey , that is why i recommend to be part of the finance community where people talk about money, progress celebrate small & big wins. click in the link below
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- Reflection: Lessons Learned in 2024
Take a moment to reflect on your financial journey this year:
- Wins-Celebrate milestones, such as reaching savings goals, paying off debt, or starting an investment portfolio.
- Challenges-Identify financial hurdles you faced. Was it unexpected expenses, poor spending habits, or not planning?
- Habits-Consider how your financial behaviors shaped your outcomes. Which habits served you well, and which ones need improvement?
This reflection will help you understand the patterns behind your financial decisions and make more informed choices moving forward.
- Goal Planning for 2025
With insights from your review and reflection, it’s time to set clear, actionable goals for the year ahead, you need to set clear Income Goals, Debt Reduction Goals, Savings & investing Goals Define the amount you want to save monthly or annually. Break it down into categories like emergency fund, retirement, and short-term goals.
If you feel overwhelmed and you need a customized plan guidance you can opt for one on one session
