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You can’t measure what you don’t manage — and this adage is particularly true when it comes to your personal finances.
You need to pay attention to your money if you want to grow your wealth. Part of that requires you to take some time to pause and reflect on where you started and the progress you’ve made.
The end of the year offers us a great opportunity to do just that. Before the clock hits midnight and we ring in 2018 together, let’s take a moment and ask:
Are you financially better off now than when you started the year?
Here’s what to evaluate to find out.
Calculate Your Net Worth
Your net worth is a useful measurement of your financial health. It’s not the only number you need to measure and evaluate your financial situation by, of course, but over time you should see an upward trend in growth.
Plus, you might feel like you’ve done a great job with your finances. But you can check that feeling against a tangible measurement, like net worth, to see if you’ve actually made progress.
Here’s how to calculate your number: Add up all your assets. That includes cash, investments, the value of your home or any other property you own, and so on. This is the valuable stuff to your name!
Then, do the same for your debts. Total up how many liabilities you have, which includes things like credit card debt, student loans , car loans, and your mortgage.
Then, subtract your liabilities from your assets. The number you get is your net worth (and yes, you can have a negative net worth — and you will, if you have more debt than assets).
Growing wealth is a process that takes time , so measuring your net worth weekly or even monthly may not be very helpful. But checking out how your net worth grows from year to year is a good way to determine whether you’re better or worse off financially over time.
Evaluate Your Debt
Another way to know if you’re better or worse off than when you started this year? Focus in on those liabilities you tallied up to calculate your net worth.
Did you pay off your credit card debt ? Did you sell your expensive car for a cheaper, used one and got rid of your hefty auto loan in the process? Did you make progress on your student debt?
Debt will hold you down and keep you from making progress toward your goals, since paying it back requires so much of your cash flow and it makes whatever you borrowed more expensive (since you’re also paying interest).
Having less debt to your name today than you had in January is a good sign you’re doing better financially.
If you found that you have the same amount of debt — or more— than you did at the beginning of the year, look at why. It might be time to make some big changes to your spending habits if you’re living above your means.
Start tracking your spending and create a budget you can stick to so you can live below your means and quit adding to your debt load. Then, make a debt repayment plan so you can get rid of those balances in the new year.
Check on Your Savings Goals and Investment Contributions
Did you hit a savings goal this year? That’s an awesome measure of your progress! There’s not much more that says “financially better off” than achieving an important goal you set for yourself.
While you’re looking into your savings, consider your retirement plans and investments, too. If you started contributing to build your nest egg, that’s a great first step and should put you in a better place today than you were in the past.
If you were already contributing, did you increase how much you put away? This is an important step to take, especially as your income increases.
Look for Increases in Income
Speaking of, did the amount of money you earn go up throughout the year? That’s another good indicator that you’re financially movin’ on up.
Again, make sure you increase your contributions to savings and investments as your income rises.
If you didn’t see your income increase, ask why. Did you take on more responsibility and ask for or negotiate a raise ? Make this a goal in the next year if you didn’t take action on this in the last 12 months.
On a similar note, consider your company benefits, too. Make sure you fully understand what’s available to you, and use the benefits that could save you money out of pocket.
Get Your Insurance in Place
Finally, if you started the year with a lot of risks you weren’t protecting — like skipping the insurance policies you really needed — you should have lined up the right solutions for you sometime in the last 12 months.
That might have been life insurance if you have dependents that need your income to be financially secure. It could have been disability insurance to protect that income, which is your biggest asset.
Related: 30 Money Moves to Make in 30 Days
Let’s Recap: Are You Financially Better Off?
This should give you an idea of where your finances are headed — whether that’s in a good direction or one that needs a course correction in the new year. But to give you a quick and easy way to make sure, run down this list:
If you said “yes,” to most of these items, nice work! You’re likely doing better financially today than when you started the year 12 months ago.
If you said “no” to a lot of these, it’s time to dig in and look at the root of the problem. That might be your spending, it might be that it’s time to increase your income by asking for a raise, or you might need to get organized and get a plan .
Whatever you do, make 2018 the year you commit to positive change in your financial situation so that when you look at this list again at the end of next year, you’re proudly checking off each box as a “yes” for what you accomplished.