Now that we are in April, it is time to look back and review your first quarter of the year. Just like corporations are reporting how they did in the first quarter, you should do the same for your household finances. Use this process as an opportunity to see where you have done well and which areas you can improve. Building this type of review into your yearly calendar is critical to your financial success.
To avoid getting overwhelmed by the process of reviewing, use the four stages of financial growth from my book The Wealth Cycle, as a way to make sure you are covering all the important areas. The four stages are:
The starting point of any personal finance plan is controlling your spending. So the most logical place to start when you are doing your quarterly review is to review your budget. Take a look at where you have spent your money in the past three months. Then compare that spending to your needs wants and wishes. If you find a larger proportion of your spending in wants and wishes than you planned in your budget, review your priorities. Either your original estimates were too low, or you are not following your budget and see it just as a 'nice to have' document. In either case, you will know what behavior you need to adjust.
If you still have outstanding consumer debt (including your mortgage), review the balances of each of your credit cards, car notes, department store cards, and mortgage(s). Look at what the balance was for each debt at the beginning of the year and compare it to the current balance. Are you making progress? Are you using your debt multiplier? If you are progressing at a slow pace with debt elimination, perhaps you need to look at increasing your income with some additional side 'hustles'. The faster you can eliminate debt, the faster you can improve your financial profile, so make it a priority.
After reviewing your debt, the next area to review is your saving and investing. Do you need to change some allocations in your retirement savings? Maybe you need to change some of your grocery shopping habits so you can save more. Or maybe you need to find a different insurance provider to save money. Take a close look at each area of expense and figure out creative ways to save.
In your quarterly review, the section on wealth building should be where you look at your income streams and see if there is a way you could do better. If you are in the earlier stages of financial being, you can use this time to review your performance at work. See if there are ways you can make yourself more valuable to your employer so that you can make a case for an increase in salary later on. If you have some 'side hustles', review what you have done to this point in the year and whether or not it is working. Can you do a better job of marketing your freelance business? Is there a new customer segment that you could go after? If you own investment real estate, this is a good time to review how each property is performing.
By no means is this article supposed to be a comprehensive guide to how you conduct your quarterly review. What you focus on in the review will be based on your current priorities. What's important is that you do the review and use it to refine your financial vision for your future. Building this habit of the periodic review will ensure that you continue making progress even when situations change around you.