One of the biggest obstacles to managing your money well is knowing where your money is going. If you’re going to make managing money a life-long habit, you’ll have to figure out where your money is going. And the best way to figure that out is to conduct an annual money check up!
Don’t worry, it’s not as scary as it sounds but it’s an exercise well worth it! To download your free Money Check-Up guide, complete the below and I’ll email it to you! (It’s free!)
1. Review your spending
Okay, I’m going to go ahead and say it…this is a toughie because it requires a bit of legwork, but honestly, this is one of those exercises that pays off BIG TIME in the end. You’ll have a way better understanding of not only what you spend your money on, but you’ll also know which months you tend to spend the most on certain stuff.
For example, when my kids are home for the summer, we spend way more money on food than we do for the rest of the year (only exception is December). This information is vital when creating a monthly budget.
Here’s what you need to do:
- Gather up your bank statements from every month (unless you’ve been tracking via your budget every month – you can just use the info you have recorded).
- Go through and fill in the worksheet (see below to grab the printable) with the appropriate information.
- Once you’ve tallied up your income and expenses, subtract your income from your expenses and record the differences in the over/under column.
- Then record in the notes section why the difference occurred.
2. Monthly budget
If you don’t already have your monthly budget in place, now is the time to make it happen. You can download my Money Check Up workbook along with my budget Excel template at the bottom or top of this post. If you prefer a more computerize approach to budgeting, head here to sign up for a free account from Personal Capital.
For a paper approach, head here to grab my Real Life on a Budget planner.
When it comes to budgeting, the important part is to remember the zero-balanced rule: the difference between income from expenses should equal $0.00. This means that all of your income has a job – meaning that any extra money you have is going towards something.
That something doesn’t mean that you’re spending it mindlessly, it means you’re applying the money towards savings, debt pay-off, or retirement. Give every dollar you earn a job to do for you.
3. Calculate your net worth
This is actually the calculation that propelled my husband to jump on the debt-free journey. For this calculation, you’ll need to know how much your assets are worth and how much your liabilities are.
Your assets are the things you own – your paid-for car, the money in your bank accounts, your retirement accounts, etc.
Your liabilities are the things you owe money to – your mortgage, any loans or credit cards, etc.
The calculation is pretty simple, you subtract your assets from your liabilities which equals your net worth.
So why is this important? The thing with net worth is that it’s pretty eye-opening to see how much money you have versus how much money you owe. And that difference is what convinced my husband that the debt-free journey was something that we should do.
4. Review accounts
This is another one that no one ever wants to do, but it’s one that can save you hundreds of dollars over the course of the year.
Here are some things to consider when reviewing your accounts:
- Insurance policies (are you getting the best rate or do you need to up the amount you’re insured for).
- Utilities (can you switch providers – like cell phones or make other adjustments?)
- Bank accounts (are you being charged any fees and if so, is there a way to completely get rid of those fees by maybe switching banks?)
- Mortgage or student loans (does it make sense to refinance at this time?)
It’s always surprising how much money we save just by making a few tweaks every year. Set aside time this week to make a few calls to gather up a few quotes for insurance or utility providers and you’ll be surprised by how much money you could potentially save.
5. Review credit reports
Even though we are now 100% debt-free we still monitor our credit reports because identity theft does happen. And even though we have no plans to use credit in the future, we still want to make sure that we aren’t being raked over for collections that aren’t even ours.
Head to annualcreditreport.com to pull up your free report – please keep in mind that you can only do this 4 times a year. This is an extremely detailed report so it’s a great tool to use to review to make sure there are no errors.
For regular monitoring we use Credit Karma – it’s free, but it’s not as detailed as the annualcreditreport.com’s site is but it’s a great way to catch any errors that happen throughout the year.
6. Money goals
I’m a firm believer in goals and if you want to see financial success, you’ll have to set some goals. Go through and determine your savings, debt payoff, retirement, and big goals. Write them down and start making them real. Head here to read this post for more details on setting financial goals. You can follow our goals on my Instagram account here.
Alright, so what is the big thing you do every year to manage your money well? Do you have a big money goal for this year?
Prefer the video version of this blog post? Here you go!
Other posts you may enjoy:
Ready for your money check up?
Managing money well is a lifetime habit and one the best things to jumpstart your progress is by performing a "money check up". Fill in your info and I'll send over your workbook along with the Monthly Budget Spreadsheet so you can get your money in order today!