Tanya Steinhofer No Comments

While it is often said that money can’t buy you happiness, it is also true that getting your financial house in order and having a clear idea of your goals and how you plan to get there can improve your mental well-being and reduce the stress in your life. And we know that a reduction in stress can lead to better health, and better health leads to happiness.

The beginning of the year is a good time to take stock of the prior year and look forward to the coming year. Here’s what has worked for my family.

  1. Take Stock. Gather your year-end account statements and update (or create) a net worth statement that lists all asset and debt values. You can use sites like Zillow.com and kbb.com if you don’t know how much your house or car is worth.  Ideally, you’d do this every year at the same time and would see an upward trajectory in net worth. It’s also helpful to calculate how much you saved during the year by comparing year-end statements from the prior year with this year on accounts like savings, 401ks, IRAs, 529s, etc. Only look at contributions, not investment performance. If you have savings goals, see how your actual savings compared to your goals. It’s also a good idea to take a look at your portfolio and see how it performed and rebalance, if necessary.
  2. Review.  Typically one partner in a relationship manages the finances, often the man. It is a good idea to sit down with the other partner and share with them how the prior year went financially. This can serve as a foundation for discussing the coming year. You can share with your partner the net worth statement, portfolio allocation and cash-flow statement if relevant. Ask them what worked and what didn’t work in the past year.
  3. Look Forward. Once you have reviewed the past year’s successes and challenges, it is time to talk about the future. This is best done together. Talk about what your goals are for the coming year, any large expenses, expected incomes, and anything else that can have a big impact financially.  Prioritize your goals and come up with a plan to achieve each one. It’s best to put it in writing so you can check back at year-end and see how you did. Implement any changes needed to help you reach those goals, such as increasing your 401k contribution rate, setting up a monthly transfer to savings for a large goal, etc. It’s a good idea to review progress several times during the year.

Reviewing your finances, setting goals and communicating with your partner about your shared finances are great ways to promote your mental health and financial well-being. It might even buy you happiness.