How to conduct a Year-end Financial Review?

18-Dec-2020 07:45:00
Reading time: 3 min
Warehouse manager checking her inventory in a large warehouse

Every year many trading and manufacturing firms all over the world close for a day or two for an annual stock taking.

During this period they audit the physical stock and compare it with the inventory on records to get an exact stock position of the company.

Perhaps the phrase "Taking Stock" had its origin from this process.

Like how the annual stock-taking process helps the firms to get an exact inventory of goods, raw materials and work in progress, A year-end financial review helps you determine the progress you have made with your finances in a particular year.

Why is a Year-End Financial Review important?

Small Flag of United Arab Emirates Sticked in the Map Background with Selective Focus.

We live and work in UAE, to be able to earn and save more than what is possible in our home countries. If we don't measure our progress every year, it is easy to lose focus and wander off track.

Also, It would be difficult to know which areas need improvement, if we don't know where we are lacking.


The Pandemic Effect

2020 has been a year like no other. A global pandemic, struggling economy a raging bull market, lay offs and furloughs and a race for a vaccine and better testing. We have seen them all this year. 

Taking stock of your finances this year is all the more important, as we are slowly inching out of the Pandemic. Our income and expenses have changed drastically this year and so may have our financial goals and priorities.

This holiday season is a great time to re-evaluate your financial position, review your goals and be better prepared for the financial opportunities & challenges in the next year.

What do you need for the review?

You would need the following tools to take stock of your financial position in 2018

  1. Review Questionnaire - To help you journal and analyse the important financial events of 2020. Click here to download
  2. Review Checklist - To help you determine the areas of improvement. Click here to download
  3. Net-Worth Comparison Template - To help you compare your net-worth at the beginning and end of 2020 Click here to download
  4. At least 1- 2 hours of time.
  5. If possible involve your spouse also in the review process.

Download & Print these three tools, before you start the review. 

Three steps to a comprehensive financial review

Step 1 - Complete the Review Questionnaire

Reflect upon the past year to answer the following questions on the Review Questionnaire

  • Did you set financial goals at the beginning of the year 2020?
  • If yes, List your top 3 financial goals at the beginning of 2020.
  • What is the status of each financial goal?
  • Did you nail it, not started on it yet, or did you abandon it halfway through?
  • What were some of your biggest Unplanned or Impulsive expenses in 2020? 
  • If possible would you go back and not buy one or more of the above?
  • How would you rate your financial progress in 2020? Do you feel that you are ending this year in a better off or worse of position?
  • What financial accomplishment(s) are you proud of?
  • What were your financial pitfalls?

Step 2 - Complete the financial review checklist.

It is a simple yes or no check list and it will not take more than 10 minutes to complete it.

Step 3 - Calculate your Net-worth at the beginning and end of 2020

How to conduct a Year-end Financial Review?This template can help you make a detailed comparison of your assets and liabilities. It also enables you to calculate the number of months you can survive without an income.

Once you have ascertained your net-worth for both periods, you will know if it increased or decreased and by how much?

If it has increased, it means you have done well and keep doing the same in 2021 as well.

If your Net-worth has decreased, then think what contributed to this decrease, maybe you have made a large purchase/expense during the year. Also, think how you can avoid such expenses in the next year.

Completing these 3 steps will help you complete the Year-end Financial Review, enabling you to gain insights about your progress in the year, expense patterns and money habits.

You can use this information to take control of your finances in 2021.

Four simple tips to make your next year's review easier

  1. Set Financial goals to be achieved in 2021. For Eg: to save x amount of money, pay off a particular loan, start an investment (decide an exact amount) or create an emergency fund etc.,Goal Setting - 2021
  2. If you have not made a personal budget yet, do it now for the next year. Download this simple Budget Planner Template or use a Smart Phone app to create your budget for 2021
  3. Record expenses regularly to help you keep track of your expenses. Read this article - how to keep your budget on track?
  4. Meet your financial advisor to conduct an annual review of your financial plan and investmentsClick Here to Arrange a Free Consultation

Feed Back & Community

Let me know if this was helpful to you, and if you have any suggestions or improvements.

Share this with your friends, family and colleagues, form a community and encourage each other to excel financially.

Wishing you a Happy & Prosperous New Year.

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