Tip #246 - Review Your Quarterly Finances. We're going to take a little break from the budget series to discuss reviewing your quarterly finances. Since it is the beginning of April, the first quarter of the year has already ended. Hard to believe! It is a good idea to review your finances on a regular basis - but not too often, or you may get caught up in moving investments around too much or not seeing any progress. Too infrequently and then you cannot make appropriate adjustments in a timely manner. Checking them about four times per year is a good amount.
What you should do four times per year:
-Review your budget - find line items that you allowed too much money and areas that you allowed too little and make any necessary adjustments.
-Check your savings accounts - are you meeting your goals for how much money you want in each of these accounts, such as your car savings, retirement savings, college savings, etc.
-Do a net worth statement - figure out your net worth by writing down your assets, liabilities, and calculating your net worth. Have you seen an increase in overall net worth since the last quarter?
-Look at your investment rates of return - check out the rates of return that you are earning on your various investments. Are you getting the most you can for the amount of risk you are willing to undertake.
After reviewing your finances for the quarter, make any changes that you feel are necessary. Perhaps you realize you aren't saving as quickly as you would like and want to increase your income. Or maybe you see that your bank is offering a special on CDs that is better than the current rate you are getting. Or you may be right on track and give yourself a pat on the back for following your goals from the beginning of the year. It makes sense to take a look at your finances and make adjustments if necessary. It can get you back on course before you fall too far away from your goals or at least give you confidence that you are doing things correctly. For four times per year, it's worth it to check out how you are doing financially.
In Real Life (IRL) - I have to admit that I look forward to the end of each quarter. I enjoy seeing how much progress we have made financially. (Although it wasn't as much fun a year ago when the stock market was plummeting.) In years past, checking our quarterly finances has allowed us to make adjustments to our newly-formed budget that wasn't refined. It has enabled us to fix some budget categories to better reflect how much we were spending or to adjust our spending to meet our budget. I was able to analyze some investment returns and reallocated some of our money.
Now that we have been doing this for quite awhile, I find that we aren't making as many adjustments. Our budget is pretty set in stone based on earlier experiences. And our goals have remained fairly steady. However, I did make an adjustment in a 401(k) investment when I reviewed our investments yesterday. I'm not sure why this one investment fell under my radar for the past year, but it did. And yesterday when I reviewed it, I realized that I had $8,000 in one account that basically earned $0 in the past year. I was able to exchange it for another stable account earning at least a couple of percentage points.
In addition to that I was able to share with my husband how much our investments and savings have grown. Sometimes my husband gets discouraged when I limit our dinners out per week or tell him that it's not in our budget to do a certain activity. But when I share with him how much our savings have increased, he becomes encouraged that we are on the right track. Try reviewing your finances once per quarter, and you will find that you can better manage where you are and where you are going, financially.