Annual review

In the beginning of January, I perform an annual financial review. It allows me to reflect on the past year while planning the next year. While it’s a financial exercise in nature, I get much more from it. It creates the space for our family to see whether we spent our resources in a meaningful way during the previous 12 months and decide what adjustments need to be made for the next 12. We get to check in on our goals, financial and otherwise. 

As we begin this new year, this is a perfect time to complete an annual review because it’s an opportunity to see things more broadly now that your books for the previous year are complete.

Once you’ve been tracking your expenses for a while, you end up with a lot of helpful data. You can see your financial trends from a new perspective. It’s also a stop sign to consider how appropriate your categories are going into the new year. When was the last time you thought about how your spending categories should be set?

This is also right when you’re conjuring ambitious resolutions. The best way to accomplish a goal is with a plan. Once you know your bottom line, revisiting your categories is your chance to make a plan for new goals.

Reviewing 2023, my biggest observation is the inverse relationship between time and money.

When looking at our spending plan, our largest expense category is childcare assistance. We had a lot of conversations around what it would mean to stop hiring for childcare which would allow for new resolutions – travel, more hobbies, more available cash. But, it would also take away from some of the time I have to work. We spend money to have that time.   

While my example is specific to our life, it illustrates the tradeoffs that exist in our financial lives. Maybe it’s not childcare but housekeepers. Or eating out instead of sticking to a meal plan. When looking at these tradeoffs holistically, we can assess what we really want. Where are we otherwise willing to make changes to continue having these things that provide us time? Or, is it worth making life changes, putting additional systems in place to have more money available?

For now, we’re keeping the childcare. Our biggest takeaway from the annual review: We’re starting quarterly reviews. We’ll reassess sooner and make sure our choices still feel aligned.

Performing our annual review is an opportunity to have these personal reflections and continue to work towards crafting an intentional life. A large part of this is carefully tracking our spending so that we can look back on the year and have an accurate picture, as well as use our numbers in projecting the next year.