Quarter 1 of 2021: Why do a quarterly review of you personal finances? What is the purpose of a quarterly review?
The need for a quarterly review
So we’ve come to the end of March and this brings us to the end of the first quarter of 2021. At the beginning of the year you set your goals or resolutions for the year, but do you measure your progress to see how well you are doing? If you don’t measure it, you can’t improve it. This is the main reason to take some time out of our busy schedules and do a quarterly review of your personal finances.
It’s not all doom and gloom – there is always an upside! Take a look at some of the numbers below.
Alternate numbers by Paulo Do Carmo
Last year this time the Dow Jones and the S&P500 had its worst and second worst point drops in history respectively.
Since then though, investors added $40T to global stocks during.
When the COVID-19 pandemic hit, healthcare and tech represented one third of the global equity market – now it sits at a cool 42%!
SPACs (Or Special Purpose Acquisition Companies) recently raised $83B!
Goldman Sachs revenue increased by 22% in 2020.
These alternate numbers was posted on 23 March 2021 and are posted weekly on LinkedIN by Paulo Do Carmo – I’d suggest you go follow him for more details on these numbers like this.
Did you set SMART goals?
It is all good and well to set lofty (or even scary) goals and setting out to achieve them, but you cannot expect to achieve your goals if you do not measure your progress along the way. For this very reason it is important to keep a journal. If you are a trader, you might want to look at a previous post I did on ‘Is your trading journal helping you improve your results‘.
Regardless of what your goals were at the beginning of this year, you need to take a step back and assess where you are in terms of your progress. If you are on track – GREAT! Well done! I suspect most people reading this are either not sure, or are falling behind. That’s OK too – there are still another three quarters left in the year – if you make some adjustments now, there is a good chance you can still gain traction and even surpass the goals you set.
To be able to MEASURE your goals, they would need to be MEASRUABLE to begin with. So goals need to be SMART! SMART goals are:
1 – Specific
Instead of saying “I want to make sales this year” say “I want to achieve my ZAR13’000’000 target in sales this year”. Instead of saying “I want to get fitter this year” say “I want to run 10km in 25 minutes or better by the end of June this year” or perhaps “I want to be able to do 10x muscle ups by the end of November this year”.
2 – Measurable
As in the examples above, there are specific details in these goal statements that are MEASURABLE. You can quantify them and break them down into smaller goal posts on the way to achieving the big picture end-goal. This will form the basis on which you track your progress. REMEMBER: Progress is rarely linear. Personally, I measure my progress in four quadrants as shown below, and at the centre of it all, I place one focus point: Living a life of purpose for the glory of God.
3 – Achievable
It is important to set BIG, SCARY goals. If they don’t challenge you to have to work hard for it, it may not even keep you inspired and your won’t gain any growth that way. It is however important that the goals you set are achievable to some measure of the imagination. You WILL need to build discipline into your goal achievement strategy! Motivation will fade after a while. Even if you don’t achieve the end-goal in the desired time, the small wins along the way should be celebrated! Each small win brings you a step closer and brings with it the benefit of the personal growth you had to go through to reach this point in your life.
4 – Relevant
The goals you set should be relevant to YOU! Forget what other people say your success should look like. You are your own competition. The only person you need to compare yourself to, is the yester-you – the person you were yesterday. To make it MORE RELEVANT, goals need to be written down and should not only be floating around in your imaginary world. Bring your thoughts out into the physical world.
5 – Time-based
There needs to be a deadline for your goals to be met, but that doesn’t mean they have to be cast in stone. When you get there and adjustments need to be made, then make the adjustments. A goal is not really a goal unless there is a time limit in which it needs to be achieved.
What should you review?
Above all, goal setting and the progress toward those goals, should be personal and unique to you and your circumstances and dreams. So when it comes to reviewing your progress, this too should be personal. Here are a few guidelines of what to review.
Your spending habits
Try to find patterns – good or bad – and do more of the good and less of the bad.
Your savings
This includes saving for personal goals like big purchases (like a car, holiday or a home) or causes as well as your emergency fund, retirement and your or your kids’ education funds.
Your Investments
Investments are things you put money into for the long term growth potential. When you do your quarterly review, you should not be making any changes to your investment portfolio – this is only a review. You should only be making changes to your investments once or twice a year.
Your debt
If you have any debt, you need to keep track of how well you are doing in paying it off. Obviously you pay this on a monthly basis, but if you can snowball your debt and pay it off quicker, you should definitely do that. On your quarterly review, you should see where you can make some adjustments, or squeeze some extra cash out, to enable yourself to pay off your debt even quicker. This is baby step number 2 after setting some money aside for your initial emergency fund.
Your financial goals
After checking your progress against the SMART goals you set, you need to review these goals and make adjustments to them if necessary. By now you could maybe have reached a goal or realised the goals you set were not quite ACHIEVABLE in the TIME frame you set for them. Don’t adjust the time frame yet though! You might just surprise yourself – but be realistic about your expectations of yourself and your starting point.
No experience is bad experience
Maybe you’ve hit a bump in the road (or perhaps a pothole the size of your car – we live in South Africa – it happens), but you should not get caught up in despair and sorrow. You can choose to get up, dust yourself off and take the next step.
No experience is bad experience. Look back for a second to see how far you’ve come, assess the damage, decide what you can learn and take note of it. Then, take the next step in the right direction, with more knowledge and wisdom than before. Don’t quit, just rest.
Don’t throw the plan out the window and try and start something completely different – unless of course you realise it was a stupid idea to begin with. With your newly acquired knowledge and experience, and hopefully with a little council and mentorship, you should be able to make a few adjustments here and there to enable yourself to move forward.
You may even be surprised at the new opportunities you will notice now.
It is never to late
You are not to old to start. You are not under qualified. You are not incompetent. You have value to add to the world around you and you can enjoy giving of yourself to the world without being taken advantage of.
Today is the first day of the rest of your life – make the most of it. Do that thing that scares you. Take your why, take your passion and your value and share it with the world. You can learn as you go – you are more capable than what you think.
Yes, take a little time to put at least half a plan in place – but don’t let that stop you from taking action. Learn on the job – make mistakes, learn from them, adjust and then keep going. On my YouTube channel, I posted a video titled “Start from where you are“. Now that you’ve done a quarterly review of your personal finances, you are in a great position to get started!
Richard Branson
“If someone offers you an opportunity, say yes and then learn how to do it.”
