How to Do an Annual Finance Review (And What Money Girl Learned From Hers)

How to Do an Annual Finance Review (And What Money Girl Learned From Hers)

For me, and most people I know, each year seems to fly by quicker than the last. It seems like I say, “I can’t believe it’s December 1st already!,” sooner every time.

That’s why it’s so important to hit the pause button on our hectic lives and take some time to reflect. If we want to improve in areas such as finances, health, or productivity, it’s critical to evaluate what went right and wrong in the previous year. and to make adjustments going forward.

In this episode, I’ll share insights into kicking off an annual personal finance review, including some important money lessons that I learned in 2014—plus reveal an awesome book recommendation to help you dive deeper into each topic..

Why Do an Annual Personal Finance Review?

If you don’t give yourself an annual personal finance review, no one else will. Neglecting to take stock of your performance could result in years, or even decades, that blend together with no significant progress toward reaching your goals. Sounds terrible, right?

It’s good to step back and examine your failures and frustrations. I enjoy the review process because you can’t change what you don’t discuss or measure.

Here are 5 lessons I learned in 2014 that will help me set goals and decide how to work next year:

Lesson #1: Decide What’s Important

The concept of focusing on one thing is pretty simple, but it became crystal clear to me after reading The One Thing: The Surprisingly Simple Truth Behind Extraordinary Results, by Gary Keller and Jay Papasan. If you struggle at all with productivity or knowing the right way to spend your time, don’t miss this book!

The One Thing really shaped my thinking about what’s keeping me from my most important work, and how to achieve more with less stress. It’s a skill that everyone should master, no matter if you’re trying to improve your finances, health, or relationships.

It’s easy to get overwhelmed by the day-to-day tasks that our careers and families demand and lose sight of the big picture - it's definitely an ongoing struggle for me. I want to challenge you to decide what’s really important in your life, and narrow the list down to just one thing.

For many, having financial security for retirement is the one big thing. In other words, having enough money to allow you the option to quit working and kick back by a certain age or date. If you’re not working toward that financial goal right now, I encourage you to get started.

Once you’re clear about achieving that one big thing, work backward to chunk it down into smaller goals; these will become your more immediate "one things," which can then be broken down into individual tasks that will become your "one thing" for each day.

See also: How to Improve Your Finances With a Personal Money Day Checklist

Lesson #2: Leverage Your Time

You’ve probably heard the saying "time is money." However, time is actually much more valuable than money because you can never get it back. You can always earn more money, but time is always used up.

So I’ve learned to guard my time like a junkyard dog. Unfortunately, that means I have to say no to opportunities and projects more often than I say yes. But once you’re clear about what’s most important to you, it gets easier to turn down anything that might derail you from success.

Here’s a quick and dirty tip: Consider outsourcing just about anything that someone else can do cheaper or better than you. To dive into the world of outsourcing and what’s really possible, I highly recommend The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich, by Tim Ferriss.

For instance, let’s say you earn about $30 an hour and don’t like doing jobs around your home, or know they take you too long. If you can pay someone $15 an hour to do something better or faster than you, such as house cleaning, laundry, or yard work, it’s probably a wise expense.

Leveraging your time includes not only becoming more productive personally, but also knowing how and when to leverage other people’s time for a fair price.

The idea is that outsourcing personal or business tasks can help you earn more, stay organized, and increase productivity, so you stay focused on accomplishing your one thing.

Leveraging your time includes not only becoming more productive personally, but also knowing how and when to leverage other people’s time for a fair price. That’s a win-win for you, and for people who specialize in the type of work that you want to accomplish.

Lesson #3: Brainstorm Solutions

There are few inventors who create prolifically in a vacuum. Most innovative people and companies rely on brainstorming sessions to come up with new solutions to problems.

If you’re frustrated about not having the financial, health, or business success you want, consider creating or joining a mastermind group.

A mastermind group is also known as a "peer success group." It’s a group of people who have a common goal, such as becoming an entrepreneur, building wealth, or getting in shape. The group meets in person or remotely on a regular basis to discuss challenges, questions, and solutions, so everyone can benefit from the collective knowledge.

I have to admit that I’ve never been a part of a formal mastermind group. However, one of my goals is to join a group of successful experts who are also building a platform and doing business online.

Author Jaime Tardy wrote The Eventual Millionaire: How Anyone Can Be an Entrepreneur and Successfully Grow Their Startup, and she also has a podcast by the same name. The book shows you how to achieve goals, and take control of your money and lifestyle. Chapter 5 is about the power that mentors, masterminds, and networking can have on your success. Check it out!

Lesson #4: Spend Mindfully

Various studies have shown that spending on experiences or on other people, rather than on material things, is key to happiness.

I’ve gone through years when I didn’t have much money to spend on non-essential things, like nice clothes or electronic gadgets, and others when I loaded up on “stuff.” So I can tell you from personal experience that spending money doesn’t buy happiness...at least for very long.

We typically anticipate being thrilled to have those new shoes or that new computer. But once you have them, the thrill wears off quickly, no matter how much they cost or for how long you wanted them.

Various studies have shown that spending on experiences or on other people, rather than on material things, is key to happiness. That's because memories of places, stories about people, and the satisfaction of helping others never get old.

Don’t get me wrong - having money can help make you more satisfied with life. However, people with more money are not happier from moment to moment than those with less. Therefore, make it a goal to spend money mindfully, and in ways that will truly increase your happiness.

Also remember that the cost of small things adds up over time. Those impulse buys may rob you of the ability to invest, build wealth, and have financial security.

I’ll give a shameless plug for my book Money Girl’s Smart Moves to Grow Rich for more about this lesson. I cover spending and your money mindset in Chapter 1; you can download it for free at SmartMovesToGrowRich.com.

Lesson #5: Find and Develop Strengths

Consider what types of work or projects make you happy or allow you to succeed. If you’re not sure, consider what you’d like to be good at. Maybe getting better at those things will require going back to school, changing jobs, or doing work for free on the side.

A wonderful book to help you find your calling is 48 Days to the Work You Love: Preparing for the New Normal. Author Dan Miller also has a podcast by the same name that’s been around since 2006. His show, "48 Days," was actually one of the very first podcasts that I ever subscribed to, and is terrific.

Dan has a knack for helping you see patterns in your skills, personality, values, and passions that point you in the direction of a meaningful career. The best way to live up to your true potential and earn more is to figure out what you do best.

So join me by taking some time to give yourself an honest annual review. Challenge yourself to make tough decisions that might be uncomfortable in the short term, but could really improve your financial well-being in the long term.

I believe that being in control of your destiny can also make you happy. So in the New Year, make a commitment to do something that really matters to you.

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