Year End: 8 Tips to Review your Finances

As the year draws to a close, it is a suitable time to conduct a comprehensive review of your financial health. It is essential to reassess your financial standing to ensure financial well-being in the coming year. Here are some tips for conducting a year-end financial check-up.

1. Review how much you have invested this year compared to what you projected last year.

Take a moment to review your ASB investment. How much have you achieved this year compared to last year? Have you achieved your dream of paying for a deposit for your new home, built a fund for your dream marriage, or, most importantly, have you at least an emergency fund that equals six months of your salary?

If you answered yes to any of your dreams and financial goals, congratulations, as you have made it. Please continue to be steadfast and committed to investing.

However, if you still need help to meet your financial objectives and have yet to reach your dreams or goals, don't be discouraged. Remember that financial progress takes time and consistent effort. Take this as an opportunity to reassess your strategies, set new, more achievable milestones, and stay dedicated to your financial journey. With persistence and smart financial planning, you can still work towards realizing your dreams and securing your financial future.

2. Review Your Budget and Assess Debt

Begin by scrutinizing your spending patterns throughout the year. Assess how closely you have adhered to your budget and identify areas for adjustments. With the rising cost of living, it is important to have an effective budget while ensuring it aligns with your financial goals and the current economic conditions.

Has your current budget helped you manage your money well this year and help you invest? If you answered no, you must reassess and revise your budget to ensure it reflects your current and future financial situation.

Additionally, it is crucial to recognize significant upcoming events in the next year, such as marriage, the arrival of a newborn, or the prospect of moving to a new home. These life-changing milestones often come with substantial financial implications. Marriage involves wedding expenses and potentially altered financial responsibilities as a couple. Welcoming a newborn means factoring in healthcare and childcare costs, while the prospect of a new home can lead to upfront expenses like down payments and moving costs, along with potential changes in monthly housing expenses.

Consider adjusting your budget for the upcoming year to ensure you navigate these events smoothly and maintain financial stability. By proactively accounting for these expenses and reallocating your financial resources, you can effectively manage your finances, allowing you to meet your financial goals and avoid unforeseen financial strain in the process.

3. Examine your outstanding debts, including credit cards, loans, and mortgages.

Prioritize paying off high-interest debts, as it will provide you with peace of mind and improve your cash flow.

If the budget does not help you reduce your debt, you are not on the right track, and the budget will need to be revised. Build a budget focusing on your needs and investment to ensure that your dependence on credit cards can be significantly reduced and manageable. Start by thoroughly examining your financial situation and clearly understanding your income, expenses, and debts.

Start by developing next year's budget with a focused on reducing your credit card debt, eliminating expenses that make you depend on your credit card, and making sure that you will not add any more debt by using other facilities such as personal loans or buy first, pay later.

Your financial standing can only be improved if you reduce your debt and start focusing on building your wealth through investment.

4. Tax Planning

Proper tax planning will allow you to receive excess tax if you manage your finances wisely throughout the year by considering all incentives, deductions, and rebates provided by the government in your expenses.

These three important elements will help you optimize the amount of tax payable. Therefore, remember to pay zakat or purchase goods and services eligible for tax deduction before the end of the year to claim for the current assessment year.

For example, if you plan to buy sports equipment, as long as you buy it before the end of the year, you will be eligible to claim income tax relief for 2023.

Remember to keep all purchase receipts as proof of purchase. Even though the receipts do not need to be submitted when making a claim, the IRB can check at any time, and not having a receipt will definitely give you problems.

5. Retirement Planning

Evaluate your retirement savings and check if your retirement savings are on track. Did you know that 6.3 million EPF members under 55 (48 percent) have less than RM10,000 in their accounts as of September 30, 2023?

The figure increased from 4.7 million members (37 percent) recorded in April 2020, before the introduction of Covid-19-related special withdrawals. With retirement savings of less than RM10,000, these members are expected to have a retirement income of less than RM42 per month for 20 years.

Having a sufficient retirement fund is essential to enjoy a comfortable retirement. Therefore, you are advised to check the amount of the retirement fund every year to make sure you know where you stand and whether the goal of comfortably retiring is achievable.

Checking your EPF amount is now very easy through the I-Akaun application. Checking this investment is very important, especially if you have invested in trust units using EPF money.

6. Estate Planning

Additionally, ensure you have prepared your asset management under estate planning for a comprehensive financial well-being. Review your beneficiary for EPF, ASB, Takaful/Insurance and Tabung Haji.

Reassess and update your wills, trusts, and beneficiaries for your various financial accounts. Ensuring your estate planning is in order is vital as your assets can be distributed according to your wishes once you pass on and minimize complications for your loved ones. Read this article here for tips on managing your assets to prevent complications.

7. Insurance/Takaful Coverage

Assess your insurance coverage to ensure adequacy for your current life stage. Some people have overlapping insurance coverage without realizing it.

If you still do not have any life insurance /takaful, maybe it is time for you to consider having one as medical cost keeps rising.

8. Future Financial Goals

Reflect on your short-term and long-term financial objectives. Now is the time to revise or set new goals for the upcoming year. Whether you plan to buy a home, get married, or save for your children's education, you can start by outlining actionable steps to achieve these objectives.

Conducting a comprehensive year-end financial check-up is an essential step for you to take to ensure your financial stability and peace of mind. Embrace this opportunity to reassess, strategize, and set the stage for a financially rewarding year ahead.

Tips for financial stability in the coming year:

1. Check how much successful investment you've made this year or otherwise.

2. Review your budget for this year; does your current budget help you manage your finances well for this year?

3. Examine outstanding debts and prioritize paying off high-interest debts.

4. Re-evaluate your insurance/takaful coverage to ensure it still aligns with your current life stage and is enough to protect your dependents.

5. Reassess your short-term and long-term financial goals and start outlining steps to achieve them.