Article 26

As the year concludes amidst midterms and festive preparations, it's vital to focus on a critical aspect of our lives - our finances. Understanding money management can be daunting, but Article 26 is poised to guide you through an end-of-year budget evaluation. Let's empower ourselves to make smarter financial choices as we step into the new year!

Why an End-of-Year Financial Review?

Conducting an end-of-year financial review is essential for introspecting your financial health, understanding your current financial position, and setting future goals. It’s about more than just identifying mistakes; it’s about recognizing spending patterns and opportunities for improvement. In my first year of college, oblivious to the impact of stress shopping, I spent over $1,000 earned from my student job on clothes, half of which I later donated. This realization led me to conduct an end-of-year financial review, crucial in realigning my spending habits and savings goals.

Step 1: Review Your Cash Flow

The foundation of any financial plan is understanding your cash flow. Start by identifying all income sources: part-time jobs, internships, family support, scholarships, and even ad-hoc gigs like babysitting or freelance projects. Every dollar counts, so don't overlook small or irregular income streams like all the monetary holiday gifts coming up. For instance, a bi-weekly tutoring session or earnings from an Etsy store can significantly boost your annual income tally.

Step 2: Assess Your Spending Habits

Next, dissect your expenses. They can be broadly categorized into three buckets: fixed, variable, and unexpected. Fixed expenses are your negotiables like rent, utilities, insurance premiums, and subscription services. Variable expenses are more flexible and include groceries, dining, entertainment, and other discretionary spending. Unexpected expenses are the wild cards - emergency medical bills, urgent car repairs, or last-minute travel. Evaluate what you consider essential. For me, it’s the small indulgences like those premium protein drinks - a trivial but significant part of my daily joy.

Step 3: Analyze Where Your Money Went

Now, delve deeper into your spending. Scrutinize each category and ask hard questions. Are all your subscriptions being utilized? How often do you eat out versus cook at home? Do your variable expenses align with your priorities? And, most importantly, did you end up spending more than what you earned? If so, it's a sign to reevaluate and readjust. Remember, the goal is not to guilt-trip but to constructively learn from your spending patterns.

Step 4: Create a Budget for the New Year

After a thorough review, allow yourself a few days to digest the information before setting a new budget. Avoid the trap of setting an overly restrictive budget in a wave of guilt. A sustainable budget balances necessity, comfort, and savings. It's your financial roadmap. Start by categorizing your expenses, then allocate funds with a focus on essential spending, discretionary indulgences, and, importantly, savings. Consider using some online budgeting and tracking tools and resources (check out our November blog).

As the year ends, mastering financial literacy is crucial for your success and well-being. While Article 26 prepares for its launch, offering a comprehensive financial mentorship experience, take advantage of existing resources such as online workshops, educational blogs, and financial advisors. Engage in forums, read books and articles, and share experiences to enrich your financial journey. We at Article 26 are excited to support you in this journey. Let's step into the new year empowered and informed. Here's to a financially smarter and brighter New Year

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Sources:

14 Essential Personal Finance Checks To Do Before The End Of The Year

The Ultimate Year-End Financial Checklist | Personal Finance Tips

Organize Your Finances with a Yearly Review {+ free printable checklists}

What Is a Personal Financial Statement? | Clearview FCU