Wednesday, April 1, 2009

Conduct A Quarterly Review

Tip #109 - Conduct A Quarterly Review. I don’t think it’s necessary to check your finances on a monthly basis. Things go up. Things go down. And sometimes you can get caught up in the details, when you just need to look at the overall picture. Once or twice per year, however, to review your finances is probably adequate. But, if you are like me, you might like to look in on things slightly more often. I like to look in on my progress four times per year - March 31, June 30, September 30 and December 31 are good dates. It gives a nice timeline of how things progressed through the year without micromanaging your accounts and your finances. You can review your budget again to see if it’s working for you or if anything needs to be changed. If you file quarterly taxes, it is a good time to get them together. You can check on the progress of your savings and investment accounts and reevaluate how your debt repayment is going, if you have debt. Lastly, you can look at your risk allocation as a whole and see if the current balances are in proportions that you had aimed for. (We’ll discuss this more in a future post.)

So why not pull out your budgets and your finance worksheets, get your balances from your banks and investment firms and figure out your status one-quarter of the way into the year? Look at how things are progressing. Make deposits to any accounts that you need to. Change anything that needs to be changed. And then don’t revisit your finances again until the end of June, other than keeping up with bills and monthly deposits. It’s good to keep an overall handle on what is going on with your finances without being swayed by daily fluctuations in the market and the economy. I find quarterly reviews to be the perfect balance.

In Real Life – I keep an Excel spreadsheet of all of my accounts – savings accounts, checking accounts, mutual fund accounts, 401(K) plans, IRA accounts, and Education Savings Accounts (ESAs). I list our assets – our home, condo, cars, and large possessions. I also keep track of any liabilities we have - our mortgage for our home and for our condo. Then throughout the year, I can keep track of how much our assets have grown and how much our liabilities have shrunk. It gives me a good overall picture of our finances.

This year we have a lot of changes occurring to our budget starting this second quarter. I mentioned that my husband’s company got bought out. Well, it officially starts today. So I have had to make changes to our budget. Co-pays on health insurance have gone up from $10 to $25. But we now have a Flex plan to set money aside in for our health expenses that we didn’t have before. My husband will no longer be getting a year-end bonus – it will be spread throughout the year, so we have to keep up with deposits to our savings accounts more regularly than in the past when we would often make lump sum deposits when we received a lump sum of money. My husband is now allowed to contribute more to his 401(k) than in the past, which while doable, will adjust some other figures in our budget. I usually don’t make many changes, if any, to our budget this late into the year, but this year is an exception.

So I am working on a revised yearly budget now that we have all of the final details of my husband’s salary, our health expenses and other benefits. Then I will get balances from all of our accounts and estimate the value on our house and condo to figure out how we are progressing with our goals. Why not check on your quarterly progress? (As a followup, I just calculated our portfolio and it is down about 2% from the end of last year. That doesn't sound too bad considering what the market did. However, we contributed a fair chunk of money from my husband's bonus and our tax return into our funds since the end of last year so it's making our loss seem less than it is. Hopefully, all will look up mid-year.)

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