End of the year: 5 steps to take stock of personal finances


With the end of the year approaching, it’s a good time to thoroughly evaluate your personal finances. Reflecting on financial achievements, detailed knowledge of financial management and identifying areas for improvement will allow you to have a clearer picture of the current situation and better project yourself into the next year.

“The financial balance sheet is not an exclusive matter for companies, on a personal level it is a very important tool that allows us to identify the current situation of our finances, to diagnose how it went during the year with the economic goals we set for ourselves. “We have developed and identified action and improvement plans for the coming year,” says Elizabeth Arellano, Produbanco’s financial education program manager, who also shares below five key steps to ensure adequate personal finance balance:

  1. Evaluate net worth: It is a key indicator of a person’s financial situation that allows you to see if money is being managed properly. To calculate it, you must add the assets (assets, savings, investments) and subtract the liabilities or debts. A positive result means that the financial situation is solid, while a negative value may indicate the need for adjustments. However, if the net worth has decreased compared to the previous year, it is not always bad, because it may be that you have decided to invest in an educational subject or start a business, everything will depend on the reasons why you presented yourself. this reduction.
  2. Analyze the level of debt and the amount saved: These indicators are necessary to know how the money was handled. If your debt level does not exceed 40% of your income and you have managed to save at least 10% of it, this is a good sign. “Remember that savings need to be linked to financial goals and this depends on different stages of life. For example, a young adult may focus on saving for education, while an adult may think of saving as a retirement fund,” explains a Produbanco spokesperson. It is also important to analyze whether the savings have enabled you to achieve the financial goals you have planned for this year.
  3. Review financial goals: Analyze which goals you have achieved and which ones remain pending. Various events and situations that occur in a person’s life can cause a change in personal finances and the goal cannot be achieved in the planned time. In these circumstances, it is most important to adapt financial goals to changes and current lifestyle, as an imbalance between reality and goals can seriously affect finances.
  4. Evaluate expenses: Are you spending more than you earn? This can be a warning sign of poor management of your resources. “Knowing what the money was used for in the year ending is a crucial aspect of analyzing the financial situation,” emphasizes Arellano. To do this, you can create a list of cash flows and determine what the main expenses were, verify credit card statements, electronic invoices and other financial documents. Pay special attention to those expenses that were not planned, because if they increase in recent months, this is a sign of insufficient financial planning.
  5. Check the emergency fund. Do you have enough funds to cover at least three to six months of fixed expenses? If not, it’s time to make a plan to build or update an emergency fund in the coming year. This allows you to cover unexpected expenses, such as appliance damage or medical care, without having to reach for credit or long-term savings.

Recommendations follow the results of the personal financial balance

Once this assessment is done, it’s time to reflect on whether the financial decisions made during the year were the most appropriate, or whether an adjustment is needed for the coming year. Elizabeth Arellano, Produbanco’s Financial Education Program Manager, provides some solutions for different financial scenarios depending on the results obtained after a personal finance assessment:

  • In case of overdraft: Design a debt repayment plan for the coming year, start paying off the most expensive debts or those with the highest interest rate to reduce your debt level. The main purpose should be not to accumulate more debt until it reaches an adequate level of debt.
  • In case of monthly illiquidity: It’s important to keep track of your expenses so you know where the money is going and start cutting unnecessary expenses. In this way, more resources can be allocated to important topics such as saving or meeting personal goals.
  • In the absence of savings: Decide to start saving. Define your financial goals as they will give you a purpose to save each month, such as: pursuing a master’s degree or specialization, buying a house, going on a trip, retirement fund, etc. It is recommended to save at least 10% of your monthly income. If you fail, start what you can, but don’t put it off any longer. The habit of saving is essential for healthy finances.

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