Hello World! Welcome Friends! Have you reviewed your finances lately?
Why Keeping Track Of Your Finances Is Important
As another year has passed, the new year brings us the hope of a fresh start. With a new year, we all have to take stock and review how we are doing financially. Just as businesses review their financial health quarterly, we should adopt this practice into our personal lives as well. If you need reasons as to why we should review our finances every quarter of the year, here is the article for you.
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1. Finding Patterns
In reviewing your finances, you may find some patterns in the way you spend and save. Since our salary is paid to us monthly, we may think that a monthly review is enough, but a quarterly review would give you an aerial overview of your finances as well.
A monthly review is simply not enough because there could be anomalies in certain months that we overlook. For example, there could be a month in the year where you tend to spend much more than the others. Thus by having a quarterly review, you get a better idea of your patterns, thereby allowing you to plan your finances in the future better.
2. Keeping Track
A quarterly review provides you with an adequate timeline throughout the year to see whether you are en route to fulfilling your financial goals. It is neither too frequent nor too sporadic for you to see any sort of progress in your goals.
This can be shown in the numerical department: if you have a goal of reaching $15,000 in your savings, then you could ask yourself if you already have $3,750 in your savings by the end of the third month. Having such a timely review will not only help you hold yourself accountable for your financial goals but also help you to plan how you aim to achieve them. If you find that you aren’t achieving your goals, then perhaps you could zoom in and analyze what the reason is before you plan how to get back on track for the subsequent months ahead. Were you spending too much in a certain month? If so, how much should you save in the next quarter so you can catch up on your goals?
3. Reevaluation
With every review, it gives us a fresh look at our plans and whether it is necessary to modify them for the future. After all, the plans that we make at the start of the year may change drastically throughout the year. Having a quarterly review gives you the chance to check whether your goals are still relevant to you throughout the year, as well as how to modify them if they are not. Are there any bigger expenses coming up that you should factor into your plans for the months ahead so that your financial goals are not disrupted?
A quarterly financial review is thus not just for you to review the past months, but for the months ahead. A retrospective view of your finances every three months, therefore, pushes you to achieve your yearly financial goals with less difficulty.
What You Should Review
With these reasons to do a quarterly review, the question now is what it is that you should be reviewing! There are six necessary items you should review in every quarterly review to ensure that you are on track.
Monthly Expenses
This basic element in a financial review helps you to analyze whether you are spending within your means. Some things you could look out for are your fixed and variable expenses. Ensure that your fixed expenses, such as your electricity and water bills, should be roughly the same, and not volatile. If you spot any weird patterns or anomalies, then ask yourself if you should be adopting some healthier habits so that your household expenses do not overwhelm you.
On the other hand, your variable expenses like food and entertainment should be reviewed to see where you can be more thrifty. Perhaps, you could forgo a meal at the restaurant you visit often and opt to cook at home instead. Do you really need more than one television subscription?
If unnecessary, try to cut these habits out so that you can cut down on your monthly expenses.
Insurance Coverage
One should always have a regular review of their insurance policies to see if they are sufficiently covered or if there are any policies that you do not need. You get to ensure that you are well protected even in the future, and could even save some money.
An example of an important policy that you should always review is your life insurance coverage. Now would be a good time to consult with your financial advisor if you have one. Besides that, there are two basic things that you should know when reviewing your insurance policies. Firstly, ensure that you are adequately covered. Ask yourself if there are any changes in your life that require you to get more coverage? Secondly, you need to know how much money you are paying for your policies. Are you paying for policies that are already inactive? You can also decide whether you wish to pay for your insurance annually instead of monthly to save more money.
If you own a house, then another important insurance policy you should review is your home insurance. If you travel often, then perhaps it is much wiser for you to pay for your travel insurance annually instead of individually.
Savings
As aforementioned, savings is one of the reasons why you should do a quarterly review. With your first quarterly review of the year, you should already have achieved ¼ of your savings goals. If you find that your goals are set too high, now is the time for you to change them up so that it is more attainable.
Investments
Investments should be done wisely, and that includes doing a quarterly review. A quarterly review is a good time to check if you know how your investments are doing so that you can plan your necessary actions. If you have met your goals, should you liquidate your investments, or do you want to pour in more money to receive a higher return? Otherwise, should you be diversifying your investments more so that you are not running a loss? Perhaps now is the time to look into cryptocurrency, and getting yourself sorted out with an app like OWNR Wallet ready to store your digital coins once you decide to start your crypto journey.
Check your investment fees as well, because they might prevent you from earning a profit. High investment fees often occur when the market is not doing well, so you might want to switch up your plans then, either short or long-term wise. However, remember that a quarterly review is not sufficient for it to be a decisive reason to change up your investments because they are a long-term venture.
Debt
In order to stay on track with your financial goals, another imperative thing to review is whether you are paying any debt off according to how you have planned to do so. If you are not in debt, then this is the time to make sure that your expenses patterns are not such that it will lend you in one.
If you are struggling to pay off your debts or find yourself stepping into one, then it is time for you to find ways to solve it based on how you are doing financially so far. By which quarter will you be able to fully pay off your debts?
This quarter review is a timely review for you to assess your credit situation so that you don’t get overwhelmed while having enough time to plan how you are going to pay off your debts.
Yearly Goals
At the end of every quarterly review, you should reassess if your yearly financial goals are realistic and attainable based on how you have been doing so far. Check if your short-term goals are met and whether you are on track for your long term ones. Of course, it is also rewarding if you find that you are doing well for the quarter so far.
Conclusion
Timely reviews and making small goals as part of your bigger yearly financial goals are definitely helpful so that you know how you have been doing and how you are going to perform subsequently. This is definitely a step to take for greater financial health.
Click the links below for any posts you have missed:
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