If you've ever spent much time around me or you've read my blog just a little, you've no doubt figured out that I'm a money management nerd. I find it fascinating, and I could talk about it forever. Thus, it should come as no surprise that I perform a year end financial review.
My review consists of two parts. First is a net worth statement. As the name implies, I total up all my assets and liabilities and see my status on December 31st. I've been doing this for several years, and of course the goal is to see the number increase each year. A lot of times as you move through your daily life it can feel as if you aren't making any financial progress. This shows the true picture in black and white. Sometimes you might be happy, and sometimes it might show there's lots of work ahead, but either way, you'll know exactly where you are.
Last year I added a second part to the year end review. I totaled up what I spent across all categories throughout the year. Of course as a true money nerd I've documented my spending for several years, but I'd never done anything like this before. Oh my. Last year was eye opening. It explained why I always felt like I had no cash in my day to day bank account. I was simply not allocating enough money for the items I expected to pay out of it. I did some rearranging, and now the feeling of insufficient funds is gone. This can also help you make a budget if you want to do that, and it can also show areas where you might really need to clamp down. This year I was able to compare my 2011 to my 2012 data. It was interesting how similar the numbers were. Thankfully everything looked good, so no changes needed to my current habits.
If you've never done a net worth statement or a year end spending analysis, I'd highly encourage you to give them each a try. The data can be very useful. If you do give it a whirl, I'd love to hear your comments.
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