End Of Year Money Checklist: 10 Steps to Start Your 2023 Off Strong

As you head into the new year, you want to get your finances in order. To achieve that, you will need a checklist to help you start the new year on the right foot. An end-of-year money checklist is meant to help you review your financial situation and make any necessary changes. You can set yourself up for success and work towards achieving your financial goals  using this list.

Your new year financial checklist will depend on your financial situation and goals. But they all have the same benefits: they help you become more aware of your finances. This will allow you to gain more control and organise your money. By identifying areas that needs changes or improvements, you will be able to make better money decisions and prioritise smartly.

Are you looking to make 2023 your best financial year? This article will explore ten steps you should take to start your new year strong.

Read Also: 10 Money Resolutions you Must Make in 2023 

Review your 2022 Finances 

Before you prepare for 2023, you need to perform an end-of-year financial assessment. This exercise will help you identify any loopholes in your finances and guide your new action plan. Reviewing your finances also involves getting everything in order. This will prevent you from being hunted by the same mistakes you committed this year.

There are three main areas you should centre your end-year review around:

Net Worth: You Need to measure your wealth to understand if you've made any progress this year. To calculate your net worth, you should subtract your total liabilities (debt) from the total value of your marketable asset. Ideally, the value you get should be positive and higher than last year's.

If your net worth has dropped or even gone into the negatives, you must figure out what went wrong. Negative net worth isn't bad as long as your liabilities consist of "good debt," like mortgages. But if your liabilities are made up of consumer loans like a personal loan you took to buy a car that doesn't make you money or makes you more productive, you might have something to worry about.

Spending Habits: Your spending habits determine how much you save and invest. If you are the kind of person that lives beyond their means, does impulsive shopping, or waste money in other ways, you have to prioritise changing those habits in 2023. 

2022 Financial Resolutions: Around this time last year, you made promises to yourself. Did you keep them? If you resolved to invest more or avoid debt, you need to look back and see how true you stayed to your determinations. If you kept your resolutions for this year, you can challenge yourself more in 2023. And if you didn't, you should determine why and try again next year. 

Read Also: Top 5 Reasons Why 80% of New Year's Resolutions Fail

Set S.M.A.R.T Financial Goals

Among the many resolution you have in mind for 2023, managing personal finances will take centre stage. To achieve most of your long-term goals, whether it is to travel, enroll for a master's degree, or make big life-changing decisions like getting married or having a child, you will need first to get your finances in order. The first step to ensure you get (and stay) on the right financial path is to set S.M.A.R.T. goals.

S.M.A.R.T. goals are realistic and actionable objectives. They help you stay on track to achieving your goals by making you approach personal finance in a more orderly manner. These types of goals are:

Specific

Measurable 

Achievable 

Realistic 

Time-Limited

How can you set and achieve these goals? It's simple. Let's look at Frank's plans to set S.M.A.R.T. goals to build his emergency fund. Frank's monthly expenses totals Ksh31,000. His main goal for 2023 is to create a rainy day fund to cover four months' worth of expenses, i.e., Ksh124,000. He's how his S.M.A.R.T goals will look:

Specific: Build up my emergency fund

Measurable: Build up an emergency fund of Ksh124,000 to cover four months of expenses.

Achievable: Cut unnecessary spending to contribute more cash to my rainy day account.

Realistic: Contribute 15% of my salary (Ksh10,500) towards achieving my goal

Time-limited: Contribute Ksh10,500 monthly for 12 straight months to build my emergency fund by the end of the year.

You can follow the same steps when planning for all your new year goals. Whether it's saving for a big purchase, paying off a debt, or investing your income. 

Read Also: Money Mastery: How to Set & Actually Achieve Your Financial Goals 

Update your Annual Budget

A budget helps you get the most out of your money as it is the most crucial tool in managing personal finance. A budget helps you balance your income with your spending– two things that are likely to change over one year. New changes that happened this year might have increased your income or expenditure. You, therefore, need to create new budget to reflect your needs.

The first step of creating an annual budget is choosing a budgeting system to help you break down expenses. The next step is to start calculating your income and expenses. The first expense you should record is the money you put away for future use. Essentially, your budget should encourage you to pay yourself first. Once that is in place, start accounting for your everyday expenses (needs), wants, and discretionary costs.

The final step is to analyse your budget. This will ensure that your expenses don't exceed your income. If it's your goal to keep your living expenses at or below 70% of your income, analysing your budget before you put it to use will help you achieve that. This practice will also ensure that you avoid surprises in the future, achieve your goals, and avoid debt. 

Creating an annual budget has a lot of benefits. It helps foster good spending habits by keeping you accountable, it enables you to save money, and it can give you peace of mind. But these benefits can only be realised if you commit to sticking to your budget, revisit it as often as possible, and make adjustments whenever possible throughout the year.

Read Also: 6 ‍Simple Steps to Create a Working Budget‍

Create your New Year Investment Strategy 

Creating an investment strategy involves more than picking investment vehicles to put your money in. A lot of thinking and planning has to go into it. Here are some things you need to consider when building your investment plan for the year:

Current financial climate - This involves looking at the markets and asking yourself if it is the best time to invest. Investors who ignore the financial environment when investing often fall victim to market risks such as changes in interest rates, currency risks, liquidity, and equity loss.

Your goals of the year - Why are you investing? Are you investing in building equity or generating income? Your financial goals will determine the type of investment you pick.

Your risk tolerance - How much market volatility are you willing to withstand to meet your objectives? Your risk tolerance will determine how you diversify and allocate your investment. A risk-averse investor will choose capital preservation, while a high-risk investor will chase higher returns even if it means losing all initial capital.

Once you have those three, you decide what to invest in. Additionally, create a plan for tracking your investments and rebalancing them whenever you have to.

Read Also: 5 Investment Strategies that Will Keep you Financially Stable

Create a Debt Repayment Plan

If you are in debt, your main goal of the new year will be lowering your debts or finishing the year debt free. But of course, this is easier said than done. Getting out of debt or reducing it requires commitment and a strategy that fits your budget and needs. 

To create that strategy, you need to follow three steps. The first one is to tally all your debts, figure out the maximum you can repay every month without straining your budget, and finally, pick a debt repayment plan.

There are three types of debt repayment plans you can choose from:

Debt Snowball Method: This plan involves paying the minimum on all debts and using the extra money you have to pay off the smaller debts. This method boosts your confidence and gives you relief every time you pay off one debt. 

Debt Avalanche Method: This plan involves paying the minimum on all debts and using the extra money you have to lower high-interest or larger loans. This method reduces the cost of your loan in the long term.

Debt Consolidation Method: This strategy involves combining all your debt into one account. You will be more focused and determined to accomplish your goals by only having one debt.

Read Also: Top 5 Mistakes to Avoid When Trying to Get Out of Debt

Keep Your Retirement Plan Up-To-Date

Retirement planning is one of the best ways to guarantee that you will stay self-sufficient in your sunset years. As you head into 2023, you should take time to review your plan to ensure you are on track to meet your goals. 

Reviewing your retirement plan helps you ensure that your plan is aligned with your future goals. It also enables you to identify loopholes, such as insufficient savings or investments that are not performing as well as expected.

By checking your retirement plan, you can make any necessary adjustments to keep your plan on track. This can help you achieve your desired retirement income and ensure a secure financial future. It can give you peace of mind and, most importantly, allows for greater flexibility. Updating your retirement plan can help you stay flexible and adapt to any changes in your circumstances, such as starting a family or changing careers

Read Also: Early Retirement: Is It Possible?

Ensure you are Prepared For Emergencies 

Financial emergencies are inevitable. As you plan your 2023 finances, you should review your emergency preparedness to ensure you are well-equipped to handle unexpected expenses. Failing to prepare can have adverse effects on your finances. It can force you to deplete your savings, liquidate investments, and, worse, go into debt.

To ensure you are prepared for any financial emergency:

Check Your Rainy Day Fund: This is a dedicated fund that you can use to cover unexpected expenses, such as medical bills or car repairs. It can also help you weather bigger financial storms, such as loss of income. Ideally, a solid emergency fund should be able to cover three to twelve months of expenses. This money should also be saved in cash or cash equivalents for easy accessibility.

Update Your Insurance: Before you enter the new year, you should ensure that you and your family ares adequately insured. Insurance can be beneficial in multiple ways. It can protect you and your assets, cover unexpected expenses, provide financial support in case of an accident or illness, and offer peace of mind. Some vital cover you should have include health, life, income protection, disability, and homeowners or renters insurance.

Read Also: Six Simple Ways to Jump-start Your Emergency Fund

Automate your Finances

This is the process of putting your finances on autopilot. Automation allows you to manage your finances more efficiently, gain greater control over your spending, pay yourself first, and pay your bills on time. You can automate finances, from savings to investing, by using the right tools and adopting new strategies.

The first step to automatic your finances is setting up automatic transfers. If you are in a SACCO, you can ask your employer to deduct your monthly contributions from your payslip every month and direct them to your SACCO savings account. You can also increase your deductibles if you have life insurance or invest in pension schemes. This ensures that you will never miss saving money.

The second step is automating your bill payment. You can achieve this by talking to your bank. They will help you set up standing orders that can help you pay fixed bills such as rent, house manager and security guard salary, utilities such as internet, etc. 

The final step is to track all your expenses. You can do this by creating a spreadsheet specifically tailored to your needs, or you can download apps that help you do it. This will help you record all your spending preventing you from going beyond your budget.

Read Also: How to Automate Your Finances - Save Time, Money and Stress 

Have the Money Talk with Your Partner 

As you make your financial plans for the new year, you must ensure that you are on the same page with your partner. This is specifically important when you have opposing money personalities. Your annual money talks should involve creating new finance rules for your household, a new budget, reviewing your progress, and criticising each other (without pointing figures).

The most important reason for having an annual money talk is to discuss bigger life changes. Depending on where you are in your relationship, this can range from planning to move in together, getting married, having a child, or enrolling your child in school. These significant life changes can significantly affect your finances, and having a conversation about money early can prevent arguments later.

Having an annual financial talk with your partner can help you stay on track with your financial goals and ensure that you are working towards a shared vision for your future. Communication is key when it comes to money, so make sure to listen to your partner’s concerns and ideas and express your thoughts and feelings clearly and respectfully. Be open and honest with your partner about your financial situation, including your income, expenses, debts, and other financial obligations.

Read Also: Yours, Mine, Ours? How Couples Can Manage Money 

Think Beyond 2023

Creating a 2023 financial plan is important, but it should align with your long-term financial goals for that plan to be viable. This will help you measure your progress and make adjustments as needed. You can use your 2023 financial resolutions as benchmarks to see how far you’ve come and whether you need to make any changes to your plan to stay on track.

For instance, if you planned to buy a house in 2025, your new year plans should involve ramping up savings to accomplish that goal as it draws near. Additionally, this will influence your investing strategy, and you will likely take a moderate or conservative path. You will be also likely avoid debt and maintain liquidity.

Read Also: 5 Reasons Why Long-Term Goals Are Important 

WRAPPING UP

To ensure that you start your 2023 strong, you should commit to changing your spending and financial habits. This begins by identifying all the bad habits you possess and replacing them with good ones that will help you achieve your new year goals. However, this takes time. You will need to be persistent and patient. 

Starting 2023 on a clean financial slate can help you achieve greater financial health, take you closer to achieving your goals, and ensure that you don’t have stress about money throughout the year. When you have a clear plan and specific steps to follow, it’s easier to stay focused and avoid getting sidetracked by short-term temptations or distractions. Constantly come back to your checklist, review it, and ensure you stay on track.