Annual financial planning

If you’ve taken on the task of mapping out your annual financial plan, you deserve a pat on the back. Making sure you’ve covered all the bases is important to both your short- and long-term financial health. Keeping track of your progress with an annual financial planning checklist makes it easier to see which tasks have been completed and which you still need to tackle.

An annual financial plan is a way to determine where you are financially at this particular moment. This means taking into consideration all your assets—how much you get paid, what’s in your savings and checking accounts, how much is in your retirement fund—as well as your liabilities, including loans, credit cards, and other personal debts. Don’t forget to include things like your mortgage or rent, plus utility bills and other monthly expenses. This snapshot should also factor in what your goals are and what you’ll need to accomplish in order to get there. This can include things such as retirement planning, tax planning, and investment strategies.

Now that you know what an annual financial plan is and how to make one, let’s recap the most important steps in the process. Check off each step that you’ve considered, even if your response was, “No, I don’t want to refinance my mortgage,” or “My credit cards are already paid off.” The idea is to make sure you’ve looked at the issue. It’s vital for you to cover every item in the above section, so that you have a full financial inventory.

Your personal financial inventory is important, because it gives you a snapshot of the health of your bottom line. This annual self-check should include: A list of assets, including items such as your emergency fund, retirement accounts, other investment and savings accounts, real estate equity, education savings, etc. (any valuable jewelry, such as an engagement ring, belongs here, too). A list of debts, including your mortgage, student loans, car loans, credit cards, and other loans. A calculation of your credit utilization ratio, which is the amount of debt you have versus your total credit limit. Your credit report and score. A review of the fees you’re paying to a financial advisor, if any, and the services they provide.

Once you have a personal financial inventory completed, you can move on to setting goals for the remainder of the year or and for the next 12 months. Your goals will be divided into short-term, mid-term, and long-term ones.

Among your short-term goals might be to: Establish a budget, which can be made easier with one of the best budgeting apps currently available. Create an emergency fund or increase your emergency fund savings. Pay off credit cards. Getting life insurance and disability income insurance. Thinking about your dreams, such as buying a first home or vacation home, renovating, moving, or saving so that you’ll have money to have a family or to send children or grandchildren to college.

Then review your long-term goals, including: Determining how much of a nest egg you’ll need to save for a comfortable retirement. Figuring out how to increase your retirement savings.

If you’re married, there are certain things that you and your spouse should be thinking about on the financial front. These are some of the items that may be on your punch list: If you have children, determining how much you’ll need to save for future college expenses. Choosing the right college savings account. If you are caring for elderly parents, investigating whether long-term care insurance or life insurance can help (also ask whether you should purchase one of these for yourself). Purchasing life insurance for yourself and your spouse. Starting to plan how you and your spouse will time your retirement, including your Social Security claiming strategy.

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