Quarterly Financial Reviews: How My Wife and I Stay on Track to Hit Our Goals
Once every quarter, my wife and I get together to review our family finances.
We do this mainly to keep our spending and investments aligned with our goals. But it also helps us to get on the same page, to exchange financial knowledge, and to make important decisions together.
It took us a couple of iterations to arrive at the current process, which is broken down into four steps, takes us less than 30 minutes, and requires updating a single spreadsheet only.
I’ve shared our process with a couple of friends recently. They found it useful, so I thought it might be worth sharing it here too.
Step 1: Get an up-to-date snapshot
The first thing we do is to create an up-to-date snapshot of our finances.
Our assets and liabilities are spread over multiple accounts (bank accounts, brokerage accounts, loans and debt, physical cash, retirement funds).
For each of these accounts, we have to log in and copy their current values into a spreadsheet. And while we’re at it, we also download related documents (like monthly statements, tax summaries etc.).
Once we have all those numbers, we calculate our current total net worth and add it to the spreadsheet too.
Step 2: Calculate cashflow
The second thing we look at is how much money comes in and how much money goes out every month.
Our spreadsheet contains a list of all regular expenses (like rent, utilities, groceries, insurance, public transport, phones, etc.). We break everything down into monthly cost, even stuff that is paid for once per year.
For categories like groceries, we only approximate how much we paid: Since we have a dedicated bank account for groceries, we check how much money went out of the account every quarter and simply divide it by three.
We also keep a list of all the money that comes in regularly (like salaries and capital gains), also averaged out per month.
During our review, we check if anything has changed and make the necessary adjustments.
Finally, we calculate the difference between money that comes in and money that goes out.
Step 3: Goal tracking
With all the data collected in a spreadsheet, we can check if we’re still on track to hit our financial goals.
We’ve outlined our goals in an Investment Policy Statement – basically a single page outlining our objectives, our investment philosophy, and a target asset allocation (what kind of assets to hold and how to balance them).
We always review this document first, to see if our philosophy, objectives or target allocation should change. Afterwards, we check if our assets and our cashflows match our goals.
If we discover a mismatch between the current state and our goals, we mention it in our spreadsheet.
Step 4: Identify actions
Based on the results of the previous step, we identify actions to take (new assets to buy, rebalancing the portfolio, reducing our expenses, etc.).
We add those actions to our spreadsheet as well and then commit to doing them. We then make sure those actions actually get done, usually before the next financial review.
Wrapping up
And that’s it – after these four steps, we’ve completed our financial review. Before we move on to other things, we take a few minutes to practice gratitude and to celebrate our accomplishments – often with coffee and cake at our favorite café.
Time for your first review!
If this article inspired you to take action yourself, the best way to get started is to write your own Investment Policy Statement. A great resource is the Bogleheads guide.
Once you’ve got that, you can begin with regular reviews. It’ll probably take you some time to get started, but it’ll get easier the more often you do this.