Value of a Quarterly Review
In case you have not heard this already, April is Financial Literacy Month in the United States, and I think it is the perfect month for this holiday. We not only have tax day on the 15th (hopefully you won’t be one of those people working until the last minute today to get yours done), but it represents the end of the first quarter of the calendar year. Most public companies utilize the calendar year-end for their corporate year-end, so we typically see a number of companies release first quarter earnings around now.
As a financial planner, I encourage my clients to do the same thing, update their numbers quarterly. As stock investors, we sometimes wait to see how a company has performed in the quarter before we determine if we will buy and sell their stock, you should think of your own balance sheet the same way. After the end of the quarter and you have run your numbers, would you buy “you” or sell “you” based on your performance?
The quarterly review process can be a tedious and time consuming one; however, it is tremendously valuable in monitoring your progress. I always like to use a road trip analogy with my clients, and at the beginning of every year, we set our goals and determine where we would like to get to by the end of the year. The quarterly review is the time we take to stop and “check the map” or GPS and determine if we are still on track for making our year-end destination or do we need to make adjustments to the trip. Maybe we planned to hit New Orleans this year, but since we stopped in Nashville, we may need to take New Orleans off the list. It is impossible to know if you need to make any adjustments, without taking the time to confirm where you are.
Results of My Son’s First Quarter Review
This year I made my son go through the process of the quarterly review. He just turned 8 in February, and as I have said, he is one of the most financially fit people that I know. But even though he makes overall smart choices, I did notice that he had gotten into a “spending” habit recently based on the fact that he felt as though he had so much money after the holidays and his birthday.
A few years back he did something similar where he spent a bunch of his money on LEGO projects, and this year it seems to be art supplies (if another colored pencil enters my house, I am leaving). He recently told me he wanted to buy something else (with his own money of course) and I said that we should stop and evaluate what his numbers look like before making that next purchase. He agreed and we pooled all of his cash together and he counted it. In both of our minds he started the year off with around $700, and when he counted his money a few weeks ago, he counted $550***.
We were both shocked. I quite frankly knew he was spending money, but not that much. He got teary eyed and complained about not having the ability to earn as much money as his mom and dad. I shared with him that I was more than willing to help him find more ways of making money as long as it was not for the main purpose of just spending it on “stuff.” He sat quiet for a little bit and then said, “Can I sell some things?” To which I happily agreed that he could and we would work on putting stuff on eBay together. The toy collection process led to this pile and a very health conversation about what he should and should not try to sell on eBay. We now have the items listed and a few of them have sold.
Catch Your Oops Early
Sometimes we get so busy with life and making financial decisions that we do not stop to take inventory of where we are and the longer we wait to do that, the more opportunity we have to get off track for our financial goals. We also open ourselves up to falling back into bad habits that we thought we might have kicked and didn’t realize we were doing. So if you haven’t don’t it yet, I highly encourage you to take some time out, look at your financial map and make sure that you are still on course for your goals. If you lost your way, that’s okay, you just need to make adjustments to the plan and move forward. Here are some things you should review about now:
Quarterly Review Items
- Your Assets – Which could include, bank and investment account statements. This should just be a quick glance to see where all of your numbers stand. If this is higher or lower depending on investments, make sure you do not have to adjust your asset allocation. If you saved more than you expected, maybe you should plan to invest more. If you saved less than expected, then maybe you need to revise future plans or try to earn more money in the next quarter like my son.
- Your Liabilities – Which could include your credit card, mortgage, or other loan statements. This should just be a quick glance as well. If this is on the high side of where you thought you were going to be, you need to revisit your plans for the next quarter and maybe cut some things out.
- Your credit score – I have clients who wonder why I harp on this, yet I have seen dramatic credit score swings happen for better or worse in a matter of weeks, so once a quarter is definitely not too much, especially when you have a free resource like Credit Karma.
- Upcoming financial “events” – i.e. birthdays, trips, events that may consume more of your resources. If you are behind in your goals, maybe you need to readjust these.
The quarterly review process is a valuable part of maintaining strong financial health, and if you find that “Oops, you did it again” and fell back into bad financial habits, you can adjust those going forward without having fallen too far behind in your goals.
***As a side note, while my son was frantically looking for things to sell on eBay in his room, my hubby looked into his wallet and realized that my son had a $100 dollar bill in there that he forgot to count as part of his total, so he actually has $650. Hubby and I smiled, winked at each other and agreed that it would be our secret. Is that wrong?
If your quarterly review didn’t look as good as you would hope (like my son’s), make sure to stop over at Sprout Wealth today and read what I wrote about how you can make more time for making money.
Do you regularly review your finances? Have you ever “caught” yourself falling back into bad habits?
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