"Which way should I choose?" asked Alice
"Well, where do you want to get to?" replied the Cat
"I don't much care" answered Alice
"If you don't care where you get to, then it doesn't matter which way you choose"
- Alice in Wonderland
Introduction
The end of the calendar year is an excellent time to stop for a moment, think about the year that has passed and check how we managed. It's something you can, and should even, do on an ongoing basis, but most of us don't get around to it. And once a year – that's definitely a minimum worth sticking to.
If we don't set ourselves goals and targets on the one hand, and check whether we met them on the other – how will we make progress?
Life is dynamic and full of changes. The goals and targets we set at the beginning of the year are not always still relevant. So it's important to make adjustments and changes so that next year we make more progress.
First of all: your relationship with money
The most important thing in the financial area is our attitude toward money. Look deep inside yourself and ask yourself, very honestly:
- What is my relationship with money? Is it something I love and embrace, or does it bring up worries and fears in me?
- Do I really want to be rich, or is it easier for me to stay stuck in my comfort zone?
- Did I move myself forward financially this year? Did I take actions that will improve my situation in the future?
- Did I seize opportunities or did I let them pass?
- Did I free myself from limiting beliefs?
- Did I overcome my fears and worries, or did I let them run me?
- Did I adopt a mindset of loving money?
- Did I take responsibility for my financial situation, or did I blame others?
It's very hard to deal with this question, because many times the conditions are against us, but that's how it is – It is what it is. We have no control over external conditions, only over our responses to those conditions.
1. The cash-flow test: "Did I keep my head above water?"
Summing up income versus expenses
Go over your average monthly expenses versus your income. Did the year end with a positive cash flow (was there a surplus left)? Or was there a deficit that was covered by loans/drawing down savings?
It's important not to fool yourself
Don't tell yourself that "it was a hard year" or that "there were a lot of unusual expenses". This is the year that was. Life is dynamic, every year is a "hard year", there are always unusual expenses.
Identifying "budget eaters"
Was there one category that significantly exceeded the budget? For example: food deliveries, emotional shopping, after-school activities, trips and vacations?
2. Mapping investments and savings
Where is my money sitting?
Make a list of all the places where you have money:
- Current account (Over VeShav)
- Bank deposits
- Provident funds (Kupot Gemel)
- Study funds (Keren Hishtalmut)
- Pension
Did I invest this year?
- Did you open a new investment channel?
- Did you increase your deposits?
- Even a deposit into savings or a money market fund is better than nothing
Checking returns
How much money "accumulated" in investments, in the study fund or in the pension from the gains themselves? Seeing the money grow on its own helps reduce the fear of investing in the future.
Checking management fees and commissions
- Am I paying the minimum management fees in every channel?
- Am I paying unnecessary fees? Banks, credit cards
3. Managing debts and obligations
What is the state of the "burden"?
Write down all the debts:
- Mortgage balance
- Bank loans
- Credit card installments that carry over into next year
There are good debts and there are bad debts
Good debts - these are debts we took for the sake of an investment (for example a mortgage, perhaps a loan we took to buy a property abroad).
Bad debts - these are loans we took to cover an overdraft or to finance ongoing expenses.
Credit card installments - are a loan in every sense. If we bought something in 12 installments – we took a one-year loan. In 36 installments – a three-year loan.
Is my debt structured correctly?
Did you manage to reduce bad debts this year, or were new ones added?
Checking interest rates
Are your loans structured correctly?
4. Examining emotional-financial resilience
The "peace of mind index"
How many times this year did you feel stressed because of money? Did you have enough reserves to sleep peacefully?
Meeting last year's goals
Did you set yourself a goal at the beginning of last year? If so, did you meet it? (Even partially meeting it is a win).
Did your financial conduct this year move you toward your goals or set you back?
Forward-planning checklist – setting goals and a plan of action
The personal and emotional side
- How am I moving myself forward on the subject of money this year?
- What am I learning?
- Which limiting belief am I freeing myself from, and how?
- How am I learning to love money?
- How am I creating a healthy conversation about money at home? With my partner and with the children?
The technical and financial parts
- Setting a monthly "cash-flow target": Decide on a fixed amount (even 200 ₪) that stays in the current account at the end of every month and doesn't "disappear"
- Defining a "small step" investment goal: "This year I'm transferring 5,000 ₪ from the current account to a basic investment vehicle (such as a money market fund)"
- A plan to eliminate/reduce bad debts: Choose the least favorable loan and decide to close it or shorten it this year
- Building an "unexpected expenses basket": Set aside an amount for repairs or unexpected events
- Building an emergency fund: So that I can cope with a major event such as a significant change in income
- Preparing for annual expenses: Summer and day camps, September and the start of the school year, the car's annual inspection and insurance
Summary
If you weren't satisfied enough with the review you did of the past year – it's well worth making a change for next year.
If the previous year was good – it's important to see what we keep and what we improve so that next year is even better.
Good luck, and onward to the millions!