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Your Money; The Jury Is In And It’s Time To Take Stock

January 8, 2014

Its a new year and the opportunities are endless. I’m excited just thinking about new possibilities.reportcard

Time to wipe the slate clean. But before you do, let’s get real about 2013. How did you do with your money?

What worked, what didn’t and, most importantly, what did you learn? What will you do differently with your money in 2014? It’s easy to jump from task to task on our “to do” lists without thinking. We all get carried away by the busyness of life, kids, careers and so much more.

Before you close the book on 2013, take time to review and reflect. After all, do you really want to make the same mistakes again this year with your money?

Keeping score is important. Like a hockey game, if you don’t keep score, how will you know how well you’re doing?

Key Questions To Ask Yourself

1)  How did I do financially in 2013- the same, better or worse than 2012 and by how much?

2)  Did I make progress towards my goals?

3)  What mistakes did I make last year that I want to change?

4)  What factors were within and outside my control- should I plan differently this year?

The easiest way to answer question 1) is to prepare your own net worth statement (i.e. personal balance sheet). If you are part of a couple, you should complete a combined one.  I finished our own net worth statement over the weekend and am happy to say that I’m pleased with the results; a 14% increase over 2012. My husband seemed pleased too- at least I think so? He’s very willing to let me, almost singlehandedly, navigate the realm of our personal finances. So I’m assuming that means he thinks I’m doing a good job? If not, he’d better speak up soon!

But, was this increase good enough?  Hard to know unless we sharpen our pencils and have some benchmarks for comparison.

On the plus side, our 14% increase came from a combination of more savings and improved investment performance. I also feel we reduced the risk of our investments through better diversification. These things are important to us as we get closer to retirement. While we were careful with our spending, I know we could have done better if we tried. For example, during Toronto’s recent ice storm and a long forty eight hours without power, we splurged on more nice meals out than we had intended.  Against my better judgement, I was within minutes of checking into a hotel to enjoy the comforts that only power, heat and light can bring!

Dig In To The Details

While our 14% increase in net worth sounds great, we need to dig deeper.  For example, if we had received a substantial inheritance (and spent 80% of it on consumable goods), we could have done much better. Alternatively, if my husband became suddenly unemployed with no salary for 8 months, our 14% increase looks superhuman. And, if our stock market investments performed much worse than the overall market, perhaps our advisor made more money off us than he should have? (Luckily, none of these things happened) This is simply an example of the analysis we must do to understand how well we are managing our financial resources.

As far as I can tell (from my less than perfect records), I have been preparing our family’s net worth statement for the last 20+ years. In the early days, it was rather depressing as our net worth never seem to budge much at all. Welcome to the expensive years of paying down a mortgage and raising a young family. But as the years passed and our net worth inched up, the annual growth became more noticeable. I realized that small efforts, over time, can make a big difference to our financial future.

Not sure how to calculate your net worth? Give it a try using the net worth calculator from Get Smarter About Money’s website.  Or, if you don’t have the knowledge, interest or time, find a financial professional to help. In the interest of shameless self promotion, I’d be happy to assist you so don’t hesitate to contact me!

Stay tuned for next week’s post on digging even deeper to evaluate your investments (and financial advisor).

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