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Are You Making Progress?


One of the best outcomes of a comprehensive financial plan is the ability to track and measure your progress toward your financial goals. Since starting my financial planning firm a year ago, I've been more serious about structuring my own financial plan, setting goals, and discussing finances with my husband. It was during one of our most recent discussions that I realized that my view of progress was way different than my husband's. We need different outcomes to feel like we've made progress. It got me thinking about all the ways to measure financial progress. 

I'm going to be deliberately focusing on progress during the next year. Here's a brief overview of some of the areas I'm thinking about. Talk to your spouse or partner about how you're doing and follow the conversation on my Facebook page and at #GenXMoney! Let me know how you view progress and whether or not you're making it.

Progress doesn't always mean moving forward

Sometimes it just means not going backward too far. I started my own business a year ago and gave up a good salary. It was almost half our household income. It was the best financial decision I ever made. How's that progress? Over the last year we haven't gone bankrupt, gotten a divorce, or had to cut back our lifestyle.

During times of change, progress can mean that you move backward financially - like taking on debt to start a business. It can mean you're not investing for retirement because you're investing in the next 30 years of your life instead. The pure financial metrics may tell us we've moved backward, but we made progress in my mind.

Although my husband knew what he was getting into, he's still stressed. He's the sole breadwinner. He's got more responsibility. He worries that we aren't moving forward enough. Does he feel better when I tell him about the numbers below? Not really.

Net Worth

Tracking your net worth can be a great way to measure progress. If you add up all of your assets (property, investments, cash, etc.), and subtract all of your liabilities (mortgages, loans, credit card debt, etc.), that's your net worth. Now this assumes you're organized, so if you're not, get organized first!

Net Worth isn't something you want to obsess over every day, but seeing it rise, month by month, quarter by quarter, year by year, can be satisfying. As I mentioned above, perhaps seeing it just stay steady during a time of change is good too.

One problem with net worth is that you can manipulate it to make yourself feel better. A couple ways I've done this is to stop updating my property values when real estate was falling, and perhaps being a little too optimistic when they were rising. Know the games you play with yourself.

My husband sees value in tracking net worth, but he has more of a target number in mind he wants to see, rather than just rising values over time. He won't think we've made progress until he hits that target number.

Cash Flow

Another way to measure progress is your monthly cash flow. Do you have money left over at the end of the month? Keeping an eye on this metric helps you see how increasing your income, or lowering your expenses can put you on track toward reaching your goals. If you're constantly battling your cash flow, progress can look like setting up a workable budget, automating your savings and bill-paying, and managing variable income.

I've had to manage our cash flow pretty closely over the last year and I'm finally to the point where I don't do it every day or even every week. That's progress to me!

My husband, on the other hand, hasn't seen the progress here either. All he's seen is the fact that he's 100% paying for health insurance, daycare, savings, taxes, and expenses. This doesn't feel like progress to him.

Peace of Mind

At the end of the day, a good financial plan will give you peace of mind. Progress toward that can look like a fully funded emergency savings bucket, appropriate life and disability insurance coverage, a completed estate plan, and properly diversified investments. In the last year, we've made progress in all of these areas. I'm feeling good about our financial plan. I'm feeling good about our progress.

Ask my husband and peace of mind is different for him. It's about having financial freedom. It's about traveling, spending time and money on hobbies, and not having to worry about working until he dies. He worries that we don't have enough, we aren't doing enough, and we aren't making enough. I guess it's up to me as our financial planner to work on that!