We’re rapidly approaching 2024, and if you haven’t been doing so already, now is the time to start preparing your personal finances for the new year. You should take a look at all the expenses you paid in 2023, revisit your budget, and plan for what’s to come.
Examine Your Accounts and Financial Statements
Now that it is December, you can look back on this past year’s accounts and statements to get an idea of the overall picture of your income, expenses, taxes, budget, etc. Did you make goals in the beginning of the year, and were you able to meet those goals? Did you accidentally overspend or face any unexpected circumstances? Or perhaps, did you save even more than you anticipated? All of this information will be a framework for next year’s plan.
Firstly, look back at your income versus your expenses throughout the year. If your expenses were higher compared to your income than you expected, it might be a good idea to reassess your budget and find areas where you can cut back, such as entertainment, shopping, etc. If your expenses ended up being lower than you anticipated, you might consider allocating some of those extra funds to your savings, retirement, or investment accounts.
Anticipate Large Upcoming Expenses
If you know you will need a large amount of funds for an upcoming expense in the new year, such as college tuition, car maintenance, home repair, etc., set that savings aside and consider it “spent”. That way, you won’t come up on these big expenses and be scrambling for cash.
Additionally, set aside what you can for emergencies. They don’t always happen, but they are almost always unexpected. Having access to even a bit of extra savings will help you avoid serious financial turmoil should something come up.
Pay Off Debts
Before the new year sets in, it’s important to try to pay off any amount of debt you can to avoid incurring more and more interest. There are two common types of debt repayment: the avalanche method and the snowball method.
- The avalanche strategy — This approach suggests that you firstly ensure you are making the minimum payments on all your debts, and then anything you have left over should be put toward paying off your highest-interest debts in order to save the most on interest in the long run.
- The snowball strategy — This approach encourages you to put any extra money you have toward your smallest balances so you can eliminate your smaller balances more quickly and shorten the list of accounts you need to pay back. As you knock one off the list, move on to the next smallest balance, and so on.
Speak to an Expert
Financial planning for the new year (and in general) can sometimes be overwhelming when navigating it on your own. Collaborating with a financial professional can ease some of the burden of ensuring your financial health is in good condition. At Republic Bank, we have expert bankers and other financial professionals ready to help you with preparing confidently for the upcoming year. Call 800-526-9127 to speak to one of our bankers and be sure to visit our resource library for more personal banking and financial planning tips.