How Do I Give Myself an End-of-Year Financial Review?

Year End Financial Check Up

Freedom Federal Credit Union Recommends This 6-Step Financial Check-up Before 2021

Q: With 2020 drawing to a close, I’d love to give myself an end-of-year financial review before it goes.  Where do I begin?

A: Giving yourself an end-of-year financial review is a wonderful way to check on the progress you’ve made toward your goals, highlight areas needing improvement and update your accounts, funds and investments. Here’s all you need to know about this important end-of-year ritual from Freedom Federal Credit Union.

 

Step 1: Review all your debts and create a payoff plan

Take a few minutes to list all your debts and their interest rates. Have you made any real progress toward paying them off this year? Or have you stuck with minimal payments each month, leaving the actual balance to pile up since you’re mostly just paying for interest?

If your debt needs some help, you have two primary options for how to proceed:

  • The avalanche method. Focus on paying off the debt with the highest interest rate first, and then continue to the debt with the second-highest interest rate. Move through the list until you’ve paid off all debts.
  • The snowball method. Work your way through your debts, starting with the lowest-balance debt. Then, once it’s paid off, apply the payment that was previously committed to that debt to your new lowest debt. Repeat through the rest until all debts are paid off.

For both methods, be sure to pay the minimum balance on all your other debts each month. Try to boost your income and/or trim your monthly spending for extra cash and use it toward the first debt you are paying off completely.

Step 2: Automate your savings

Review your savings from 2020. Have you reached your goals? Have you forgotten to put money into savings each month?

Going forward, make it easy by automating your savings. Give us a call at to set up an automatic monthly transfer from your checking account to your savings account. [You can also set this up through your online and/or mobile banking with us.] This way, you’ll never forget to put money into savings again.

Step 3: Review the progress you have (or haven’t) made on financial goals

Have you made measurable progress toward your financial goals in 2020?

Take a few minutes to review your past goals, taking note of your progress and determining how you can move toward achieving them.

Step 4: Review your retirement account(s) and investments

As you work through this crucial step, be sure to review the following variables:

  • Your employer’s matching contributions. Are you taking advantage of this free money, or leaving some of it on the table?
  • The maximum IRA contribution limits for 2021. You will likely need to make adjustments for the coming year.
  • Management fees and expense ratios for your investments. Fees should ideally be less than 0.1%.
  • Your stock/bond ratio and investing style. You may want to take more risks in 2021 or decide to play it safer this year.
  • Your portfolio’s balance. Does it need adjusting?
Step 5: Create an ICE Binder

The events of 2020 underscored the importance of making plans in case one becomes incapacitated for any reason. Create an In-Case-of-Emergency (ICE) Binder to hold all your important documents in one place in case the unthinkable happens. Because of the sensitive nature of the information it holds, be sure to keep this in a safe place where it will not fall into the hands of identity thieves.

Include the following in your binder:

  • Medical information
  • Account information
  • Child care and pet care details
  • Online accounts and passwords
  • Insurance policy documentation and details
  • Investment accounts and details
  • A copy of your life insurance policy
  • A copy of your living will
  • A copy of your last will and testament

Step 6: Set new financial goals for 2021

As you finish reviewing your financial progress of the past year, look forward to accomplishing greater financial goals in the coming year.

A great way to turn dreams into reality is to set goals that are SMART:

Specific

Measurable

Attainable

Realistic

Timely

Here are some goals you may want to set for the coming year:

  • Create a monthly budget before January. Be sure to include all expense categories. Review on the first of each month and tweak as necessary.
  • Review the week’s spending with your partner each Friday night.
  • Pay off your largest credit card bill by 2022.
  • Start a vacation fund in February.
  • Cut out two subscriptions you don’t really use by mid-year.
  • Slash your weekly grocery bill by 10% before May.

Wishing you a financially healthy New Year!

Your Turn: Do you have any additional steps for your own end-of-year financial review?  Tell us about it on Facebook, Twitter, or Instagram. @FreedomFedCU

#FreedomToHelpChallenge 2020

 

#FreedomToHelpChallenge

Win $1,000 for your favorite local charity!

Freedom Federal Credit Union believes in people helping people and we are challenging Harford and Baltimore County volunteers, companies, and non-profits to participate in the award-winning 3rd annual #FreedomToHelpChallenge photo contest this holiday season. Showcase volunteerism in Harford or Baltimore County for the chance to win a $1,000 charitable donation for your local non-profit of choice and other weekly prizes.

HOW TO ENTER:

1. Like or Follow Freedom Federal Credit Union on Social Media (Facebook, Twitter, Instagram)

2. Post public photos showcasing volunteerism in Harford or Baltimore County from November 2nd through December 10th, 2020

3. Include a description of the volunteer effort along with the searchable hashtag, #FreedomToHelpChallenge on every post

4. Visit us on Facebook every Friday to participate in public voting to increase your chances to win! (Every like equals a vote!)

On Instagram? Tag Freedom @FreedomFedCU or DM us to follow you if your account is private.

The #FreedomToHelpChallenge was recognized by CUNA in 2019 with The Dora Maxwell Social Responsibility Community Service Award

 

Read Full Contest Rules and Details Here.

Grand Prize Info: The Final Showdown

Public Voting for finalists will be available on Freedom’s Facebook page on Tuesday, December 15, 2020 at 10:00 am for 24 hours from the start of the voting period. Every like equals a vote. Share with your friends to increase your votes. The Grand Prize Winner will be announced via Freedom’s Facebook, Twitter, and Instagram page on or before December 16th, 2020.

*Selected charity must be a registered 501(C)3 with a proven focus in Harford or Baltimore County.

What Makes This Recession Different

The 2020 Recession

Unless you’ve been living in a bunker for the last several months, you’ve likely caught the term “recession” thrown around on the news more than once. Hearing this word being used to describe the state of the U.S. economy can trigger a range of reactions from mild anxiety to a full-blown stuffing-money-under-the-mattress panic.

For many people, though, part of their angst surrounding the state of the economy is the vast amount of unknown: What is the exact definition of a recession? How is it different from a depression? How long do recessions usually last? What causes a recession?

So many questions — but we’ve got answers! Here’s all you need to know about recessions, the current state of the U.S. economy and what all of this means to you as a private consumer.

What is a recession? 

A recession is a widespread economic decline in a designated region that lasts for several months or longer. In a recession, the gross domestic product (GDP), or the total value of all goods and services produced in the region, decreases for two consecutive quarters. A healthy economy is continually expanding, so a contracting GDP suggests that problems are brewing within the economy. In most recessions, the GDP growth will slow for several quarters before it turns negative.

What’s the difference between a recession and a depression?

A depression has criteria similar to that of a recession, but is much more severe. For example, in both a recession and a depression the unemployment rate rises; however, during the Great Recession of 2008, the worst recession in U.S. history to date, unemployment peaked at 10%, while during the Great Depression, unemployment levels soared to 25%. Similarly, during the Great Recession, the GDP contracted by 4.2%, while during the Great Depression it shrank by 30%.

Depressions also last a lot longer than recessions. The Great Depression officially lasted for four years but continued to impact the economy for more than a decade. In contrast, recessions generally last only 11 months, according to data from the National Bureau of Economic Research (NBER).

There have been 47 recessions in U.S. history, and a total of 13 recessions since the Great Depression. There has only been a single recorded depression in our country’s history.

What causes a recession? 

A recession can be triggered by a variety of factors:

  • A sudden economic shock that causes severe financial damage.
  • Excessive debt carried by consumers and businesses, leading to debt defaults and bankruptcies.
  • Asset bubbles, or when investors’ make irrational decisions, overbuy stocks and then rush to sell, causing a market crash.
  • Excessive inflation and rising interest rates, which triggers a decline in economic activity.
  • Excessive deflation, which sparks a decrease in wages, further depressing prices.
  • Technological changes, including outsourcing jobs to machines or other technological breakthroughs that alter the way entire industries operate.

Why the COVID-19 recession is unlike any other?

In June 2020, the NBER  announced that the U.S. economy had been in recession since February.

The COVID-19 recession, also known as the coronavirus recession, the Great Shutdown, the Great Lockdown or the Coronavirus Crash, is unique because it was sparked by an unforeseen pandemic and not by any inherent problem within the economy.

Another anomaly of the coronavirus recession is the super-healthy state of the economy before it hit. In February, unemployment levels were at a 50-year low, stock markets were at a record high and the U.S. economy had enjoyed 126 months of growth,  its longest period of uninterrupted expansion in history.

The unusual triggers and the explosive start of the current recession may be good news for its eventual end. Economists initially were hopeful that the recession could reverse itself quickly with a V-shaped recovery. Unfortunately, due to prolonged lockdowns and the nationwide failure to keep infection rates down, they have since declared that a rapid rebound is unlikely. There is still hope for a relatively fast recovery. An April Reuters poll  found that nearly half of 45 economists believed the U.S. recovery would be U-shaped: slower and more gradual than a V-shaped recovery, but still fairly quick.

How will this recession affect me?

The coronavirus recession can impact the average consumer in multiple ways.

First, many are struggling with sudden unemployment or will be facing joblessness in the coming months. The most recent data from the Bureau of Labor Statistics show the unemployment rate at a staggering 10.2%.

Second, the economic uncertainty has triggered record-low interest rates, which in turn sparked a rush to refinance. If you are currently paying high interest rates on a long-term loan, you may want to consider refinancing and enjoying a lower monthly payment.

Finally, investments in stocks, bonds and real estate may lose value during a recession.

The good news is there’s no need to start stuffing money under your mattress. As a member of Freedom FCU, your funds are always safe. [Freedom FCU is federally insured up to $250,000 by the National Credit Union Administration] and independently insured up to [$250,000 by NCUA]. If you are experiencing financial difficulties of any kind, feel free to reach out to us at or to drop us a line at to see how we can help.

Your Turn: What do you think will be most impacted by the coronavirus recession?  Share your thoughts with us on Facebook.