A Strategic Check-in on Your Finances
Two weeks ago, I talked about setting personal strategy. Last week, I talked about the conversation my wife and I have about our relationship and family strategy. Well, the final part of our annual strategy retreat is a check-in on our finances.
An important piece of context is that we’re lucky enough that our finances don’t demand attention day-to-day or even month-to-month. And it’s exactly why we spend so much time on them during the strategy retreat.
Here’s how it goes:
Step 1: Analysis
The retreat serves as the occasion to pull all the data together from our disparate financial service providers and to take a cold, hard look at how things work. While we might check individual account balances occasionally, this step is about creating a comprehensive view.
Practically, that means asking ourselves:
What are we actually spending money on?
What are we accidentally spending money on? (The main culprit: subscriptions to services that we don’t use or don’t get much value from.)
What strategies can we use to improve our financial situation over the next year?
Where can we simplify or further automate our finances? (This is both about removing friction to good behaviors and about reducing the time it takes to manage the system.)
For us, this year’s spending highlights:
We had 212 transactions at grocery stores, or a trip every other day.
Being at home during the pandemic led to having more trips to District Doughnut than to any decently healthy restaurant.
On a financial return basis, having kids continues to be the single worst decision we’ve ever made.
OK, that’s the easy part. The analysis takes time, but someone just has to do the work.
Step 2: What does awesome look like?
Here’s where the conversation gets more interesting. It’s not just about the numbers going in the right direction. If we’re doing Step 1 right, we should be well above "good enough."
So the single most important thing we ask about our finances is something qualitative: How are they helping us achieve our overarching goals?
The deeper questions that are part of that assessment include:
How do we feel about our finances?
Are they helping us experience joy and live according to our values?
What opportunities or risks do we see on the horizon that would be worth preparing for?
We start answering those questions using a survey (example here) that helps shape our conversation. And it manifests in a dashboard, which I’ve shared here previously.
Step 3: Hygiene
Just as important as the analysis and conversation, we use the retreat as the occasion to do some financial hygiene, particularly around our estate plan.
The core activities are:
Updating our “Map to My Life” documents. The Map to My Life is a document that lists all of the information we would need in case the other passed away—e.g., accounts, insurance policies, key contacts.
Checking our estate planning documents—e.g., insurance coverage, will, living will—to see if they still meet what we need. (And if not, scheduling a call without the insurance provider or lawyer.)
Checking the beneficiaries on any new insurance policies or investment accounts to make sure they are right. This is especially true for when we switch jobs.
What these activities have in common is that they are all important, but never urgent. That’s why we have a forcing mechanism to pay attention to them.
To put it more starkly: We need to look at it today because we don’t know what will happen tomorrow.
TAKING ACTION
The key part of this strategy is really just deciding that it’s important and then committing to do it. At least one person has to sign up to do the initial legwork, and then both partners have to be committed to following through with the conversation itself.
If it’s helpful, here’s a checklist that might help spur thinking about what you might want to include in your check-in.
A QUOTE (OR THREE) I’VE BEEN THINKING ABOUT
They’re actually all from Happy Money by Elizabeth Dunn and Michael Norton:
“New research shows that greater wealth often fails to provide as much happiness as many people expect.”
“Research shows that experiences provide more happiness than material goods in part because experiences are more likely to make us feel connected to others.”
“Abundance, as it turns out, is the enemy of appreciation.”