It's that time of year where somehow, in the midst of the holiday parties, preparations and bustle, we also somehow manage to find time to reflect on the past year and start thinking ahead to the New Year.
When it comes to our money, one of the most valuable actions we can take is to set annual goals and then take the time to reflect upon them. To ask ourselves not just the quantitative "did I go over budget this year" or "how much did I pay down debt," but also the qualitative "do I feel good about the financial movement I made this year" and "what is the most important thing to me about my money moving into the new year."
I believe that when we treat our personal finances a little more like a business' finances, we get the clarity that comes from having well defined financial goals and a system put in place to review them. Any business that is smart and mindful about its growth has already developed their 2014 budget, and they've reviewed "how is 2013 going" every month this year. They'll be doing one final review in January and then forge ahead working on 2014.
What is your plan for reviewing your 2013 numbers and launching your 2014 budget and goals? In the Finance Boot Camps, we often ask the question "what would your hero do?" One of my financial heroes is a friend of mine who has a system that on January 1st of every year he carves out a portion of his day to look at his numbers for the year. For many of us, this would take all day long. For him, I suspect it’s fairly quick as he has the same routine as each month ends. Having that level of systematic approach to your personal finances keeps you from straying too far from your target and leaves you with the peace of mind of know where you are.
What should you look at? I encourage people to keep it simple. It's far more meaningful to look at your big picture numbers:
- How much did you earn?
- How much did you spend?
- How much did you increase your savings overall, and then in each category (retirement, reserves, other special savings accounts)
- How much did you decrease your debt?
- In each of those categories, did you do what you said you'd do? If not, why?
- What do you aspire to do differently (or the same) next year?
I've slated the morning of January 4th to answer these questions for myself. When would be a good time for you to answer these questions?
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