Your Annual Financial Performance Review

by Gary Foreman

Not certain where you stand financially right now? Give yourself a financial performance review by answering some simple yet telling questions to find out how your finances are currently measuring up.

When I worked in the corporate world, the annual performance review was always important. Not only was it a way of telling how I was doing compared to what my employer expected, but it was also a good opportunity to identify areas where improvements could be made.

Sometimes, I agreed with the boss’ comments. But, there were other times that I really thought that I could have done a better evaluation myself.

The concept of an annual review can be helpful in your financial life, too.

There are certain things that you should evaluate on a regular basis. And it’s also a good idea to look at your own performance periodically. Most of us have some areas where we could do better if we’re willing to make minor changes.

So, let’s perform an annual review of our finances. In this case, you’ll be reviewing yourself. So, if you don’t like the score you get, you’ll know exactly where to go to complain!

Have You Reviewed Your Auto Insurance Within the Last Year?

• 3 points for checking for appropriate coverage and comparing rates.
• 1 point for checking either.
• 0 points for thinking that your brother-in-law, the insurance agent, is taking care of it!

As your cars and family grow older, your needs will change. And, you might find a better rate by shopping around. See Do You Know About These Auto Insurance Discounts?

Have You Reviewed Your Homeowner’s Insurance in the Last Two Years?

1. 3 points if you reviewed it this year.
2. 1 point if you reviewed it the year before.
3. 0 points for thinking that you only need to look at your homeowner’s policy when you buy a new home.

While not as likely to change as your auto policy, homeowner’s coverage still needs to be reviewed periodically. See Homeowners Insurance Basics Every Homeowner Should Know.

How Much Money Do You Owe?

• 3 points for reducing your total debt by 10% or more.
• 2 points for reducing it by 5 to 10%.
• 1 point for reducing it by 1 to 5%.
• 0 points if it remained the same. Minus 1 point if the amount you owe went up.

An easy way to measure your economic well-being is to see if you owe more or less money than you did last year.

• Be Debt-Free This Year
• What Does My Debt Cost Me?

How Is Your Debt Structured?

• 3 points if you don’t owe any money to anyone.
• 2 points if you only owe money on your home.
• 1 point if you owe on your house and car.
• 0 points if you owe on a credit card or personal loan.
• Minus 1 point if you owe money to everyone in your office.

Generally, borrowing to buy something that will hold its value (like a house) isn’t as bad as borrowing for something that will be gone long before the payments are (like a pizza).

• Paying Down Credit Card Debt Faster
• When You’re Behind in Credit Card Bills

Did You Add to Your Retirement Savings Last Year?

• 3 points if you saved 4% of your salary or more last year.
• 2 points if you saved 2 to 4% of your salary.
• 1 point if you saved 1% of your salary.
• 0 points if you didn’t add anything to your retirement accounts.
• Minus two points if you borrowed from your retirement plan last year.

Each year brings you that much closer to retirement. And, the magic of compounding means that a dollar saved for retirement in your 20s is much more valuable than a dollar saved in your 50s. So every year counts.

• How To Get Started Saving for Retirement in Your 20s, 30s and 40s
• When You’re Really Late to the Retirement Planning Game

Have You Reviewed Your Investments in the Last Year?

• 3 points if you reviewed your investments at least once each quarter.
• 1 point if you reviewed them at least once during the year.
• 0 points if your account statements are stacked on your desk waiting for you to look at them.

You don’t need to be a Wall Street wizard to know that today’s investment climate changes quickly. That means that you need to look at your investment position regularly to see if adjustments are required.

It’s tempting to focus on whether you made money since your last review. Yes, that’s something that you should check. But, more importantly, are you positioned for the future? Do you need to make any changes now?

See:

• Measuring Your Investment Returns
• Finding Higher Investment Returns (and Realistic Returns)

So How Did You Do?

If you scored 15 or more, you really have things under control. You’re probably only reading this because it’s after-hours, and you can’t call your broker or insurance agent at this time!

A score of 10 to 14 points indicates that you’re trying, but still need a little work to be a personal finance pro.

If you scored between 5 and 9 points, you probably need to pay more attention to your finances.

And if you scored less than 5 points, make sure that your rich uncle has included you in his will. You’ll need the cash!

• What Motivates You To Care About Your Personal Finances?
• Prescriptions for 5 Common Financial Ailments
• Put Yourself on a Financial Diet

Reviewed December 2023

About the Author

Gary Foreman is the former owner and editor of The Dollar Stretcher. He's the author of How to Conquer Debt No Matter How Much You Have and has been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.