Since I've been awake at least three hours before the rest of my crew, it's opened up a lot of free time. These are normally my high productivity hours, but this year they have been anything but, and mostly filled with ridiculous web searches, rewatching movies I slept through the night before (this is why I'm able to wake up so early), pacing throughout the house, checking the fridge four times per hour for any spontaneously generated, ready-to-eat food items, and listening for signs of activity from upstairs like footsteps, farts, nose blowing, or running water.
The one task I did manage to finish was putting together my annual "State of the Olson Family" report. Every year I create a Powerpoint presentation and set of Excel spreadsheets for the four of us to review our finances and progress against goals we set for ourselves the year before.
Why do I do this? Well, since there's zero chance of any sort of meaningful career progression with my current employer, and since Ana and I shut down our own property management company years ago, I need some other way to channel my grand CEO and leadership aspirations, and who better to push around than your kids? They are like employees in many ways; they are entirely dependant on me for their income, they put in the least amount of effort possible, they goof around and shirk their responsibilities every chance they get, and must be continually monitored to achieve mediocre results at best.
In case you aspire to become a sad finance and planning nerd like myself, I'll tell you how I do it.
First, I track every dollar we earn and spend throughout the year. Incredibly, I use the program MS Money 2006, which has been basically dead for over 10 years, but still somehow functions. I've searched for a good replacement (Quicken, Mint, YNAB, Personal Capital, etc) and tried a few, but none of them are able to do what Money does. Ana and I keep all the receipts for everything we spend and toss them into the home office in-box. Once the pile is 14 inches high, I sit down and match them up with all the bank and credit card transactions I download from our internet banking into MS Money. This includes grouping them all into a relatively small number of income and expense categories.
I also store all of our investments in MS Money. Before the product was de-supported it used to automatically import all of the investment transactions from our bank, but since that stopped working I now do this manually, and periodically update the stock prices. I do this as infrequently as possible because I do not like knowing what the stock market is doing and I don't care. Because I primarily use ETF index funds that simply track the market, then monitoring the ups and downs in prices is pointless and unnecessarily painful. I only buy and sell stocks once per year at rebalancing time, at whatever price they are at that day, and get it over as quickly as possible so I don't have to think about it for another 12 months.
Lastly, I record all of our assets such as the house, vehicles and sailboat and depreciate or revalue them each year as required, which gives me an accurate estimate of what they are worth. The program also allows me to track expenses against these assets so we can see how much these "assets" are costing us. I quote this because the true definitions of asset is something that generates money for you; items like houses, cars and boats are actually liabilities because they consume money. A lot of money. But like my buddy Andrew always says, "It's just not possible to put a value for fun on the spreadsheet". And God knows I have tried.
With this data I'm able to easily calculate a current total net worth, and since I've been doing this for nearly 15 years, I have an awesome "Net Worth Over Time" graph that sends chills down my spine every time I look at it, thinking of the hundreds of hours slumped over a keyboard I've put into collecting all the data, and the chronic lower back pain that has resulted from it. I also generate a simple income statement that shows what we earned, what we spent, and most importantly, what we saved. In fact, the most important number to me is the total percentage of earned income that we save in a year. Personal finance gurus say this should be 10% which, in my opinion, is far too low. Mr Money Mustache (google him, very inspiring) says it should be more like 70%, but he's a frugality fanatic who only showers once a week and doesn't love exotic vacations as much as us, so we try to end up somewhere between these.
For our investments I create a simple one pager that shows the targets we have for each asset class (Canadian stocks, US stocks, Int'l stocks, Fixed income, Cash) and what the actual percentage is. This is what I use for rebalancing our investments, which happens once per year at the start of January when we can put new money into registered investment accounts like TFSAs and RESPs.
With all this data in hand, I create the Powerpoint presentation. The first slide is always on safety and we talk about any accidents we had this year, any preventative maintenance we did on our vehicles or house, and that sort of thing. If working in the oil industry for ten years taught me one thing, it is the importance of safety, and how that must be the most first consideration of anything you do. Like Metallica said, if you wind up dead, then Nothing Else Matters.
Next, we look at the goals we set for ourselves at the start of the year and judge whether or not we achieved them. Each year these are different - we can have fitness goals (two workouts a week), learning goals (improve French skills), financial goals (save $5/week), project goals (sew new boat cushions instead of buying them), life goals (learn how to cook two delicious vegetarian meals), travel goals (visit Detroit) and so on. Sometimes we achieve them, sometimes we don't. If the goals languish on the list unfulfilled for two or three years, we get rid of them, because they are obviously not that important.
We then move onto financials and review our earning and spending categories line by line, comparing each to previous years, and look for areas where we can improve. Common topics that come up during this discussion are car pooling to work, how often we dine out, how much we are giving to charity, and how much we spend on travel. By far, our largest indulgences are sailing and travel, and we try to scrimp on everything else in order to free up as much funds as possible for these, because that is what we love to do.
At the end, we set new goals for ourselves for the upcoming year and then usually go out for lunch to celebrate. For me, it is a fun exercise, and forces us constantly evaluate what we do, why we are doing it, and where we are going. The kids are usually getting quite squirmy by the end of it (and think I'm a dork), but I'm hoping they will remember this exercise and hopefully make planning a part of their lives once they are on their own.
Merry Christmas and have a super bueno 2019!