How to Do a Year End Review with Your Family’s Financial Goals

Get a peek into how we did with our goals for this year and see how you can do your year review and set yourself up for an incredible 2022!

Why You Need to Do a Year-End Review with Your Money

It's November, aka the time of the year where I usually start winding down. 

As you may or may not know, I take December off from the podcast to recharge and rest things. We also have our anniversary then.

With those things in mind, these last two episodes of the season are focused on helping you set things up for a fantastic year in 2022 and beyond.

Besides our monthly money review, one of the things we do is a year end review. It’s a way for us to review the numbers, celebrate wins, and see what we need to work on. 

We then take that information and use it to plan out the next year. 

Today I want to walk you through the process. We’ll go through our goals we made for the year, finding the money to reach them, and whether we’re on track with them or not.

Next week, we’ll then look at how to create goals in a way so you can make progress. 

Are you ready? Let’s get started!

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Our 2021 Financial Goals

Let's start off with our financial goals that we made this year. They were three big ones.

  1. Build up our brokerage account
  2. Pay down our mortgage
  3. Replacing and fixing the windows in our house.

Right off the bat. You may have noticed a couple things.

The first is these goals will probably take a big chunk of money to reach and you're right.

One thing I want to be absolutely clear on is we would not even consider these goals until we had our financial foundation in place.

These goals reflect that we're further along in our financial journey.

Some of the first goals and steps we took was making sure that:

  • we had an emergency fund that was fully padded.
  • we paid off our unnecessary debts
  • we were setting aside money for retirement

We're grateful to be in this position, but it did take work upfront so I want to be clear about that.

Even with those pieces in place, though, we knew this year, we definitely have to hustle. If we're going to meet these goals.

The second thing you may have noticed is that these goals are vague.

They're missing some key numbers. So let's fill these in and talk about why I prefer to include details with our goals.

One of the big things that has helped us achieve our goals is how we framed them. And we like to make our goals smart. And in case you're unfamiliar with the term, it's an acronym. To help you remember key things you need to include when making your goals.

A smart goal is specific, measurable, attainable, results, focus, and time base.

Let me do a quick summary of each of those.

Let's start with being specific. This is a big mistake that a lot of us make myself included is that we start off the year with a goal of I'm going to save more or I'm going to pay down debt. But a specific goal would be. I'm going to put aside 5%. To save in our emergency fund or I'm going to pay.

An extra $50 towards the credit card debt. Being specific helps you start framing it in more concrete terms.

The second is your goal should be measurable. How do you know when you've hit your goal? If you're saving more, is there a specific Mount you're saving to. Or if you're paying off debt, how much do you want to pay off by the end of the month or the year? However you decide to do the timeline. The reason you want to do this is you want to track your progress. If you're tracking your progress, you're more likely to hit your goal.

And then the third piece of this is attainable. Now I've seen some people translate this acronym and use it for ambitious, but here's the thing. If this is your first time working with goals. You need to build and develop that habit first.

You don't have to make them super simple, but if you make them attainable, You're more likely to have a win, and that's going to encourage you to continue on your financial journey.

The next piece is result focus and this includes a bit about your why behind the goal. You're paying off debt. That's fantastic. But why?

What options become available once you hit that goal? For example, if you're paying off your credit card and high-interest debts. Are you freeing up money? So that you can travel more as a family. Or are you trying to reduce your monthly expenses? So you can cut back on your hours at work. So you have more time with your family.

Being clear on the result that you're trying to achieve can help you stay motivated when things get tough.

Finally being time-based and this goes back to framing it so that you can build a plan out of this by setting a deadline, you can work backward and break down the steps you need to take and make sure that you're hitting those milestones along the way.

Switching over to smart goals has definitely been very helpful for us. And it's easier for me to track our progress. And see where we have to make adjustments early on. Either with the goal or with the deadline

Switching over to smart goals has definitely been very helpful for us and it's easier for me to track our progress. We can see where we have to make adjustments fairly early on either with the goal, the deadline, or how we're going to achieve it.

If you noticed, they’re missing some key numbers. Let’s fill these in and why we prefer to include details to make SMART goals.  

Creating SMART Goals

If you've listened to the podcast or known me for a bit, you know that I'm a fan of SMART goals.

For those unfamiliar with SMART goals, here are the key things you need to know when making them.

  • Specific: Choose a specific goal. Don’t say ’save more’, but instead choose ‘put aside 5% of our paychecks into savings for our emergency fund.’
  • Measurable: How do you know when you reached your goal? If you are saving an emergency fund up, consider setting aside 3-6 months of your living expenses in the account and track your progress.
  • Attainable: I;’ve seen some people use ambitious, but here’s the thing – if this is your first time working with goals, you need to build that habit first. It's better to work on a few goals at a time so you don’t feel overwhelmed. Be gazelle intense on the ones you have. 
  • Result focused: This includes a bit of your why behind the goal. Make sure your goal is something you can do and truly believe in. Have a plan of action that you can sustain.
  • Time-Based: By setting a deadline, you can work backward and break down the steps you need to take and make those your milestones along the way.

With SMART goals, you’re not just listing what you want to do but you’re framing your goals specifically which includes a timeline and a measurable amount.  

Let’s break down these goals one by one as well as explain why they all have the same deadline.

Build up Brokerage Account

We opened our brokerage account last spring during the national lockdown. (This is what nerds do when they’re stuck at home!)

Before then pretty much – okay everything we invested went into our retirement accounts, the 401(k) and IRAs. There’s just one catch – those accounts are for retirement. 

With the idea of financial independence, you’re going to need a stash set aside for those in between years when you plan to retire or wind down until you’re 59 ½, which is when you can access your IRA without penalty.  

After discussing our options we’re settling on a combination of investments in the market and at real estate. 

We started the first half of that plan with the brokerage account. Next year we’ll give more attention to real estate. 

Our SMART goal for the year was to build up our brokerage account to $50k by the end of year.

Pay Down Our Mortgage

Our goal is pretty straightforward: we're looking to take our thirty year mortgage and pay it off in ten. 

Whenever we picture this goal of being financially free or independent, one thing we agreed on is that it wouldn’t include a mortgage payment. 

With five years down, we have five years left on our self imposed clock. That means we need to set aside $20k/year to knock out our mortgage. 

Not only will that shave twenty years, but we’ll save around $X in interest payments. 

Is it a stretch? Yes, but it’s doable. Again, it’s about finding that balance of hitting that goal and enjoying the time we have now at a sustainable rate. 

Our SMART goal for the year was to pay down our mortgage to under $90K by the end of the year.

By the way, if you’re thinking about paying the mortgage off early, you should check out the Mortgage Free Masterplan. It’s what we use to run the numbers and track our progress. 

Andrew, from Family Money Plan created it to make it easier for you to create a pay off plan that aligns with your family’s goals. Just grab it at simplifyandenjoy.com/mortgageFreePlan

Replace the Windows

Our beautiful ranch is sixty years old and those windows appeared to be original. 

Our SMART goal for the year was to replace the five windows on the main level that were breaking down. Using the estimate we got from a few companies in the area, we saw that they could cost between $X and $X. 

Hopefully you can see how important it is to frame your goals. 

Planning is good, but it’s just one piece of the puzzle, let's get into how to move that plan forward into action. 

Our adjusted SMART goal is replacing our windows by the end of the year.

Finding Money for Our Goals

Now that you see our goals and how much we’re putting towards them, the next question is, where is this money coming from? 

Our Old Debt Payments Are Now Working For Us

First off, a huge reason we can set aside money for these goals is because we carry no other debts. The mortgage is that last one.

That means the payments that we're making for the car and student loans are now being directed towards saving, investing in giving.

Having gone through this journey for years, I can understand that sometimes when you're dealing with significant amounts of debts, it seems overwhelming.

So if that's where you are now, please hang in there. I know it is a chore and work to go through this, but it is worth it because you can then free up your money to go towards the people and projects that really matter to you

Bake Your Goals into Your Budget

Another way we’ve been able to hit our goals is by automating our money. It started off as an easy way to make sure our bills were paid, but we now use it for other things. 

When we paid off those old debts, for example, we immediately changed our automated payments and now had them go towards first savings and then investing. 

Just quickly going back to that idea of having a deadline for the smart goal. Let's say that we needed to save $10,000 by the end of the year.

Knowing that, we look at the numbers. It means we have to allocate an extra 833 a month. Or if we were trying to save 5,000 for the year, that would be an extra 416 a month.

If you already have room in your budget and you see that I do have that amount of money I can put towards the goal. Great. Just go ahead and schedule those transfers or payments.

If there's a gap, then go ahead and schedule what you can do.

Let's take that $833 a month. Let's say, you know, for sure you can do an extra 500 a month. Go ahead and put that on your automated transfers or payment system.

You can then work on either building up your payment or adjusting your timeline. But you have something going in towards that goal and you're going to be making progress.

Allocating Extra Income

Finally, the last piece of the puzzle is allocating extra income. And that can mean a variety of different things.

At the beginning of our financial journey, it was extra side hustle money we brought in. It was tax refunds. It was getting rebates that we sent in.

The income that we brought in varied greatly, depending on what it was, but we use that money towards our goal.

This past year we took advantage of whatever bonuses were earned. And tax credits that we qualified for being parents of two kids.

Since we already planned our financial budget for the year and we were comfortable for it. We use whatever extra income we had to go towards those three goals.

So hopefully you can see that it took a lot of different pieces to come together for us to work towards our goals and our plans, but it also meant that if something broke down we weren't completely going to fail with our goals.

How Are We Doing?

All right we went over the goals and the process of us working towards those goals. So how are we doing?

Replacing the windows on the main floor was the first goal that we hit. We actually placed our order around end of January, beginning of February and got them installed in may. There was a significant delay with the manufacturing, but that has been accomplished.

We're really happy with the windows we got and have ordered more, which hopefully should be coming this week or next.

As for the mortgage, it will be down to the wire. It looks like we will be able to hit it by the middle of next month.

Finally, we have the brokerage account. While we've made some great progress. I don't think we're going to hit that mark, but we are going to be fairly close. It looks like if all things continue the way they are, we'll hit our goal in February of 2022.

There you have it. That's a general overview review of our financial goals and the progress we made.

The next step we do is what's worked. I think we did a great job with three allocating transfers to the savings and the brokerage.

On the other hand, we had some unexpected windfalls, like those tax credits that we're not going to plan or budget for in 2022.

Hopefully, as you can see that a year review doesn't have to be just the numbers. You're also going to be looking at the systems that you have in place, whether that's the automatic transfers, contributions or payments. If it's working, you continue that. If it's not, you can see exactly what needs to be adjusted. It could be a matter of optimizing your expenses or increasing your income.

If you want to have a spreadsheet that you can use for your own year-end review, make sure you're subscribed to the newsletter. Just go to simplify and enjoy.com/join.

I'll share a template for free, all you have to do is be a member!

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