It's hard to believe that we've turned the page on 2021, a year full of ups, downs, and everything in between. But before you look ahead to the possibility that 2022 holds, it may be a good idea to evaluate how you did financially over the previous 12 months. Did you meet the goals you defined at the outset? If not, where did you fall short? Taking stock can improve your chances for success going forward, and help you draw a clearer roadmap toward financial freedom.

Budget & spending, emergency & other expenses, and savings are arguably the three most important areas to look at before adjusting any future plans.

Budget & Spending

Did you have a budget in place for 2021? If so, how successful were you in adhering to it? Sticking to the monthly allocations you put in place can be difficult, but also rewarding, especially when you see excess balances. Relatedly, how was your spending? Were you able to ignore frivolous and expensive temptations, or did you succumb to your whims? Find those areas where perhaps you weren’t as frugal and make a priority to double down on them in 2022.

A budget should include the following categories:

• Living Costs: Put your rent/mortgage and insurance into your budgeting spreadsheet and make note of any increases or decreases, in case you need to reallocate funds.
• Utilities: Calculate your 2021 monthly averages and place that figure into your spreadsheet. This is an area in which you want to see consistency from year to year.
• Groceries: This category always fluctuates, but do your best to come up with a monthly average. Also, try to keep track of whether you fully use what you purchase, and if not, what went to waste.
• Transportation: Factor in car payments, insurance, gas, public/private parking, and anything else related to how you get around town. Other than changes to a car payment, hopefully these numbers stay consistent annually – and if not, determine where you can do better.
• Entertainment: Restaurants, movies, sporting events – anything you do for fun that costs money fall into this category. And while it may not be as rigid as some of the others, it's equally important. Don't forget to leave enough in your account to allow yourself the freedom to do the things you love!

Emergency & Other Expenses

Ensure that you have an emergency account ready and funded in case something unplanned happens. Think about what came into the picture this past year that you weren’t expecting. Now, take that information and create a plan. Whether or not you need those funds, you'll be as prepared as possible in the face of the unexpected.

Look ahead and think about any major purchases you'll be making in the new year. Perhaps a car, a home project, or even education expenses are in the offing. Preplanning will make these less of a shock to your bank account and allow you peace of mind when the time comes to pay for them. Using your budget, you can determine those areas from which you can reallocate funds, so that every item is balancing out.

Savings

How is your savings account looking? I don’t know of a single person who hasn’t struggled with theirs at some point. It’s hard to designate funds every month to put away, but even when it’s a struggle, you'll be thankful you did when something big comes up, or you reach retirement age. Take stock of how much you've saved and what your goals are.