Happy 2020!

I hope this is the beginning of an excellent year for you. And for me too, frankly.

Today is going to be a social day, and I plan to enjoy it before I go back to the regular work schedule tomorrow.

However, there are a few financial tasks I do every year around this time, which I still haven’t quite finished. I think they are pretty helpful, and would recommend them to anyone.

Calculate Net Worth

The first thing I usually do at year’s end (or beginning) is to calculate my net worth. For me, that’s the easiest. I actually did that yesterday.

It takes just a few minutes–well, probably half an hour, as I had to log into a couple of different accounts, write things down, and then do some math.

I add up my retirement accounts, my bank accounts, and brokerage account. These are my assets. I don’t count my house, because it is pretty illiquid; put another way, if I need the money fast, it’s not coming from my house. Also, I like living here and don’t want to sell it.

Then I add up my debts: mortgage, student loans, car loan (it’s at zero percent, I’m keeping it for now), and some credit cards that haven’t been paid yet (checks go out in a few days).

A little addition, a little subtraction, and I have a number.

I have been doing this for at least 12 years, so I can compare numbers and see my progress.

Financial Goals

On the same paper (yes, I do this with pen and paper), I review my financial goals. If the goals are funded, I note which account they are funded from.

They usually look something like this:

• Emergency fund. Do we have enough money to support the household for 6 months, in case I lose my job/quit/can’t work.
• House fund. This is for house maintenance, repairing or replacing appliances. Also car repairs.
• Vacation/travel fund. If we spend more than fits in the monthly budget on travel–usually plane tickets–the money to pay for it comes from here.
• Car fund. Though I have no plans to pay off the car loan early, I have no plans to finance my next car. I am hoping to keep the current one until it croaks, and by then to have enough in the Car Fund to pay cash for the replacement car.
• Extra investing fund. This has been on hold for a number of years as I paid down my mortgage. It is time to consider how much more I want to put away, with the idea it will help fund retirement in time.
• Piano fund. This also has been on hold while I paid down the mortgage. Especially since I am not sure I have time to practice, nor have I cleared enough furniture to make room for an instrument. However, I think I may start putting aside money each month for this. The worst that could happen is that I decide not to get a piano and have extra money sitting around.

Review Spending

This takes me a little more time, as I don’t do this throughout the year. I will probably work on the project this weekend.

It’s a little easier these days, since the bank and the credit cards categorize spending subtotals for you. However, sometimes they get the category wrong. So it takes a while to make sure each total is correct, and then add up spending from each account.

I expect we will see a rising amount spent on utilities (it sure seems the bills are getting bigger every month) and possibly less on travel (since we purposefully didn’t go on international vacations last year). We may or may not make changes to our spending, but I think it is a useful exercise to see where the money is going. If you find yourself exclaiming, we spent how much on that? it can be a wake up call.

I find this is most useful to see what our monthly expenditures are, as a guide to our retirement funding needs. If we only spend $4, 000 a month, we don’t need to save as much as if we spend $8,000.

I can then take this information and circle back to the goals. Can we cut a few expenses now? Can we save a little more here, whether for retirement or the piano? Or is new carpeting really the order of the day?

I say this is a once-a-year exercise, but I confess, I do refer to the results throughout the year. It’s like starting a long road trip with the map already highlighted.

Here’s to a great ride in 2020.

Do you have your own year-end money practice? Do you do something like this, but more frequently? Does this all sound like too much work for you?