Friday, January 25, 2019

Finance Friday: Conducting a Financial Review

Happy Friday! Look at me posting 2 "Finance Friday" posts in the first month of the year! I was hoping for one post/quarter but I'm exceeding that goal for the first quarter! The wheels might fall off quickly, though, so we'll see if I can keep this up.

I talked about our 2018 spending in my last Finance Friday post and today I'm going to talk about the financial review that Phil and I just conducted. We try to do these about twice a year. We always do one at the beginning of the year in preparation for tax season. When Phil and I got married, we decided to combine our finances because it just seemed easiest. That said, we still have a lot of individual saving, retirement, and investment accounts so it's necessary for us to sit down on a regular basis to review things. Regardless of whether you are single or married, I think a financial review is an important thing to do on a regular basis so you are being mindful about your financial goals! Here's what our process looks like.


Even though I use to keep track of our spending, Phil prefers to keep our 'financial review' data in an excel spreadsheet. We are both excel geeks so this makes sense.


For our review, he updates the balances of all of our accounts such as savings, 401ks, IRAs, investments, health savings accounts, etc. He also updates the balance of our mortgage which is the only debt we have between us. We use credit cards to take advantage of points but we pay the balances off each month. I used to have a sickening amount of student loan debt thanks to grad school but I worked hard to pay that off early in my 30s. I mention that because I don't want to come off as "being holier than thou" when it comes to finances.


Gathering the data can be the pesky part of the process but the important part of a financial review is what you actually do with the data. This is why some people opt to do their financial review with a financial advisor. Phil and I have opted to not work with an advisor because we feel like we have more-than-adequate knowledge between the two of us since are both CFA charterholders.

The most important question to ask is:

- What is your goal? This question will drive all the other questions you will ask yourself. In our case, we are hoping/planning to make a down payment on a home - hopefully this year! Besides that, we want to make sure we have enough saved for retirement, that our retirement accounts are properly invested, and we want to save for the expense of Paul's college education. Additionally, I would love to retire early - like in my 50s! So we need to save, save, save to make that a reality!

For others, the goal might be to pay down debt, establish emergency savings, save for a down payment for a home, increase retirement savings, etc.

Once you've established your big goals, more questions will follow that will help you accomplish that goal. For us, our follow-up questions are:

- Do we need to make changes to the allocations of our retirement accounts (i.e. the balance between equity and bond mutual funds/ETFs)?
- Do we have the right amount of money in savings or should we move some of that into an investment account?
- What should we do with the bonuses we will receive this spring (Phil and I are fortunate to work in industries with bonus payments) - should we put them in savings? Invest them? Pay down our mortgage? When making this decision we consider the interest rate of our mortgage compared to what we could earn in an investment account.
- When and how much will be contribute to Paul's 529 plan (a 529 plan is a tax-advantaged college savings account)?

After this financial review, we didn't make any changes because we need a lot of financial flexibility (i.e. we are keeping more money in savings than we normally would) since we hope to buy a house this year. Once we find a house we'll finally be able to make some substantial changes.

In closing I will say that part of me feels a little bit uncomfortable even talking about our financial review process because I know that our financial situation is different than a lot of people. That said, I would say we are probably more frugal than the average couple so our frugality coupled with working in a well-compensated industry has resulted in financial stability. However, we also work in a very volatile industry so we have to be really mindful about saving enough in case one or both of us loses our job at some point. But that said, I recognize that we are very lucky to be in the position we are in. But it hasn't come easily - we've worked really hard to advance our careers and have been really mindful about what we do with our money.

This openness about financial decisions is something we are going to be mindful of as Paul gets older. We feel that our parents did a really good job preparing us to manage our finances. We then built upon the basic knowledge they gave us about the importance of savings and living within our means. That's something we really want to instill in Paul.

Do you do a financial review? Is there a financial goal you are working towards?


Kyria @ Travel Spot said...

I love these posts! It's always fascinating to see what other people do regarding their finances, especially when you read stats about less than 25% of Americans having more than $1,000 in savings. I always want to review their spending and see if that statement makes sense! I do not do a review on the way you do butbindo review everything when I do my annual money pie. This is a great chance to see where my money is going and if I need to make any changes. I also use a portfolio tool on the Bank of America website that breaks out all of my accounts and show my net worth etc.

Kelly (She Wears a Red Sox Cap) said...

I love these posts too!

I don't think you should apologize for being in a better position than a lot of people- as you said, you've worked hard and continue to work hard and make choices for it. Also, I still think your tips are extremely helpful especially considering your education and work background and apply to all people.

Another fun resource you probably already listen to for info about "financial summits" (as they call them) is the Matrimoney podcast with Kelsey from the Girl Next Door podcast.

missris said...

I find these kinds of posts so interesting! We have semi-combined finances and each keep track of our net worth month-by-month, which makes it easy to do a year-end review every year. I also track every single penny we spend, because I'm OCD like that :)

Charbelle said...

I'm so thankful that you do these posts! I think they are very helpful! I probably need to do a better job of the review process!

Jeanie said...

This isn't really my wheelhouse, though I do my best and always find it interesting to do a bit of a review at the end of the year, though not so comprehensive as yours. I learn from you!

San said...

I think it's great that more people talk about their finances... we can learn so much from each other.
You don't have to apologize for being in a good financial situation and for being smart with your money, there are still valuable lessons for people that are in a less fortunate situation.

I do think we (J and I) should meet with a financial advisor at some point. We live on one income, but have some savings + investments, but we should probably talk about what you called "goals"... because a lot of it is just "sitting" right now.

Stephany said...

I want to start by agreeing with what other people have said: don't apologize for your financial state! You earned it rightfully and have made smart decisions with your money. You could be using your money to always go out to eat, buy the latest gadgets, and travel expensively but you don't do any of that. Just because someone makes a good wage, that doesn't mean they use their money wisely - and you and Phil DO. You should be proud of that!

I don't really conduct a financial review because it doesn't really make a ton of sense in my life right now (I don't really have many assets, lol). I do try to set some money goals every year, and this year it's to FINALLY get that $1,000 emergency fund going as well as pay a little bit extra to my student loans. I also want to start saving to potentially move apartments in 2020.

Gracie said...

David and I hold similar financial reviews once a year, plus at times of change - so buying a house, changing jobs, moving money around. I would also love to retire early, since David is older than me. It would be miserable to be trucking off to work for 8 years after his retirement! But I am sure I won't...I am a little addicted to work, I think!

Amber said...

This post was so interesting to read! We do not do an annual financial review like this but we do talk about our finances very often and evaluate large purchases together. Our big goal over the next couple of years now that we are cutting back on big traveling is to save a very significant chunk of money in a savings account. I also have a goal of aggressively paying down debt. We don't have credit card debt, but we have two vehicle loans that I would like to pay off as quickly as possible. I'm going to start with mine since it has higher interest and then my plan is once that is paid off put all that money onto Eric's truck. I am hoping to pay off both loans in 3 years and I don't even bother with envisioning paying off our mortgages and being totally "debt free" as I really do not see that ever happening, ha. But I would like to be as 'debt free' as possible so getting those car loans taken care of will help with that!

Clipping Path said...

Thank you so much for the detailed article

Jolene - EverydayFoodie said...

We don't do an annual review, but we talk about our finances all the time, and have the same spending habits and financial goals. We hate debt, so we try to avoid it, other than our mortgage. We don't buy a lot of clothing/stuff, and most of our money goes toward travel, food, and investments.

The Many Thoughts of a Reader said...

We do not do an annual review but we do talk when something may change, he needs me to give my info for something etc.. haha. We only owe on his truck payment currently and I think we are on track to pay that off in November. Which will be 3 years early on that loan. We paid our house off and I quit working so that's been nice. We do have a good healthy savings and both have retirement accounts and we started a college plan for the kiddo. Obviously we could have more if I worked, but with subbing once in a great while and volunteering and being available more wit my family, I find that holds a lot of value.

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