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Going Back in TimeA time to look forward, New Years gives us the opportunity to better ourselves. We set resolutions raising the bar where we’ve fallen short before. As we focus on our new goals, the old year is soon forgotten along with all that happened in the past.

Being a nut about advanced planning, we make a lot of headway financially in the month of January. Our portfolios are rebalanced, insurances are reviewed and updated, and our Roth IRAs are fully-funded (read why I’m a fan of “front-loading”) for 2011. Okay so what about the remaining 300+ days?

Being well-prepared not only keeps you ahead of the game, it also allows for more reflection. Knowing what you did well gives a strong sense of satisfaction and knowing what you did wrong helps you improve going forward.

Knowing What You Did Wrong

While we maintain a solid grasp on what’s coming in and going out throughout the year, I still like to go back and review everything in detail once it’s all said and done. Using Quicken Premier to generate different reports and graphs, we examine our cash flow, investment returns, spending habits, and so on.

Since you’re looking into the past, there are no errors in reporting. Almost like a financial intervention, we can’t lie to ourselves once we look at the numbers. In the present you can have mental accounting mistakes or memory glitches, but there’s no changing what’s already happened.

This can be particularly useful for those tracking against a budget or and wanting to know how well they did. Just like a performance review at work, this year-end review will show how successfully you achieved your budgetary goals. If anything was over what you anticipated for, you now know that and can adjust going forward.

“What part of the pie?” means nothing if you can’t visualize how much the pie actually represents. Cataloging expenses against total income illustrates actually how much of your financial pie is going to X or Y. If you’re trying to curtail spending habits, you won’t get a clearer picture than this.

Knowing What You Did Right

Of course not everything we do needs correcting. Sometimes, we actually get things right (gasp)! Starting this endeavor my first year after graduation, I’ve felt a strong sense of accomplishment from seeing an annualized savings of 25% plus year over year with over 40% being the highlight.

Although essential, managing big ticket items can be intimidating and seeing actual costs come in at or under the budgeted amount provides more positive feedback. It shows you made an effort to: seek out savings, cut unnecessary costs, or negotiate the bottom line. We had what may have seemed like a lavish wedding this past August yet managed to come in way under (over 50%) the touted averages* for our area.

*Don’t like using comparative averages because “doing average is what keeps the average down”.

Looking Backward – Moving Forward

Take some time this year to dust off last year’s files and see how you did. It shouldn’t take more than half a day and the information you’ll receive will be well worth the time spent.

After you do, revisit your New Year’s resolutions. Maybe they’re too easy and not challenging enough, or maybe they’re too difficult and you’re setting yourself up for failure.

Either way, learn from what you’ve already done and use it to better yourself this next go around. Isn’t that what resolutions are for anyway?

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5 Responses
  1. Sounds like a very smart move! Unfortunately I don’t do that but as my investing activity picks up, it sounds like a smart move to make!

    Oh, that picture reminds me of a ride we went on when we went to Disney, good memories :)

    1. Fin Engr

      MR: Even just reviewing your budgetary goals would be worthwhile. It helps give a better perspective on what actually happened. What’s that quote – “If we don’t learn from history, we’re doomed to repeat it”?

  2. I love using my Quickbooks pie charts and graphs to figure out where my money is going and where I can save the most. I also compare previous years to the current year to see if I’m improving.

    1. Fin Engr

      Little House: NICE! Glad to see I’m not the only one looking backwards :) Can give a sobering view of things if you keep your categories in order.

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