Broker Check

Year End Exercise

December 31, 2020

Rest easy; this type of exercise does not require special clothing or a gym membership and usually doesn't cause you to sweat. This exercise only requires a spreadsheet or even just a piece of paper.

While there are many apps and other tools to help you with your finances, I have developed and refined a simple tool over the last ten years to help me set, track, and prioritize my financial goals for the year. The "keep it simple" principle really works in this situation. My spreadsheet has seven columns – Savings/Debt reduction, Prior Year-end Balance, Current Balance, Current Year Goal, Current Year Actual, Surplus/Shortfall, Priority.

At the top of my spreadsheet, I have a Savings section. I list retirement accounts, brokerage accounts, savings, other investment assets, and future purchases. Below this section, I have the Debt Reduction section, where I list credit cards, car loans, home equity, and other debt.

Right about now (December), I create my spreadsheet for 2021. Some of the items like my retirement account contributions are automatic, so I put the amount in the 2021 Goal column and the 2021 Actual column. This practice makes me feel like I am off to a good start and provides momentum to meet my other goals. My wife and I discuss the other items on our spreadsheet to determine how we want to direct our money. Lastly, we select a priority for each item. Retirement accounts and college savings may have the highest priority, while paying an additional amount on a low-interest car loan may be the lowest. I update my spreadsheet at the end of each quarter to see how we are progressing throughout the year and get us back on track if we've been slacking.

The beauty of this simple tool is that you can customize it to your specific situation and add notes or other information. Pulling this one-page reference up throughout the year is a handy way to get a good snapshot of your finances and reinforce your progress. I've been using this for ten years, and it is eye-opening to see the progress we've made over that time.

Happy New Year, and don't forget the real exercise so you can be physically and fiscally fit in 2021 and beyond.