A Practical Money Check-Up for Families
- An annual financial review is a dedicated time to assess your householdS financial health, offering clarity and peace of mind by identifying areas for betterment and adjustment.
- This process isn't about strict auditing, but rather a comprehensive check-up on your finances.
- according to a 2023 survey by teh National Foundation for Credit Counseling,66% of Americans report feeling anxious about their finances,highlighting the need for proactive financial management tools like...
What is an annual financial review?
An annual financial review is a dedicated time to assess your householdS financial health, offering clarity and peace of mind by identifying areas for betterment and adjustment.
This process isn’t about strict auditing, but rather a comprehensive check-up on your finances. It involves gathering key documents, reviewing income and expenses, and evaluating progress toward financial goals.Regular reviews help families proactively manage their money and reduce financial stress.
according to a 2023 survey by teh National Foundation for Credit Counseling,66% of Americans report feeling anxious about their finances,highlighting the need for proactive financial management tools like annual reviews. National Foundation for Credit Counseling
How do you start an annual financial review?
The first step in an annual financial review is to gather essential financial documents.
This includes collecting your previous year’s tax return (Form 1040), recent pay stubs covering at least the last three months, statements from your primary bank and credit card accounts, summaries of investment and retirement accounts (401(k), IRA, brokerage accounts), and documentation for any outstanding loans such as mortgages, auto loans, or student loans. The goal is to obtain a broad overview, not to meticulously track every transaction.
For example, if a family completed their 2022 tax return in April 2023, that document should be included in their 2023 annual financial review.
What’s the next step after gathering documents?
After gathering documents, the next step is to review where your money went during the past year.
Analyze your income and expenses to understand spending patterns. Categorize expenses (housing, transportation, food, entertainment, etc.) to identify areas where you might be overspending or where adjustments can be made. Budgeting apps can automate this process, providing visual representations of your cash flow. Compare your actual spending to your initial budget (if you have one) to identify variances.
A report from the Consumer Financial Protection Bureau (CFPB) in December 2022 showed that approximately 40% of Americans do not track their spending, indicating a notable opportunity for improved financial awareness. CFPB report