What financial information should I understand, and how often should I review it?

February 1, 2013

Advisor answers

James Dowd

James Dowd


To develop a successful financial plan, you need a basic understanding of your cash flow, assets, and liabilities. For example, how much is your annual household income? How much is withheld for taxes, retirement savings, and other benefits? What is your general level of household expenses, and what portion is discretionary? What is the balance of your household financial assets, such as bank and investment accounts, retirement accounts, and real estate? How about loans and other liabilities? The a...

At the most the most basic level, I recommend having a budget and recording whether you meet your budget monthly. I also recommend understanding your assets (ie, stocks, bonds, real estate) as a percentage of your overall net worth. Annually, it is advisable to ask yourself if your assets are meeting your financial goals. Is the risk to high in one asset, or two low? Is the asset performing as expected? It may seem daunting to keep track of your assets, but I find it helps to have a single spreadsheet (o...

Jonathan DeYoe

Jonathan DeYoe


You will need to understand where you are (current statements) and where you are going (goals and milestones) as a context for any financial information you review. You have to be able to define success before you start reviewing your finances and your plan. In our book, proximity to reaching YOUR financial goals is the only SANE definition of success.

Everyone has different lifetime goals, but most goals can be understood within the following broad categories.

1. Life time income (incl. quality of life and ...

Martin Weil

Martin Weil


Everyone should be able to answer 1) How much income do I make? and 2) How much am I spending?

If the value of #1 is higher than that of #2, then you are a net saver and on the right path. The opposite, however, is unsustainable and leads to many of the financial problems people find themselves facing.

Don’t know the answer to either question? There are numerous easy-to-use, systems, from computer software to mobile apps that will help keep track of these numbers with a minimum of effort.

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Keeping yourself in the driver’s seat of your finances and investments is vital to your financial future. Although putting everything down in black and white can seem scary, once you create new habits around how you maintain your finances, you’ll be better equipped to make the changes necessary to achieve your financial goals.

Here are some financial questions you should try to always know the answer to:

The key to financial transparency: You should know the source of your inflows, and be in control of your outflows.&...

Christopher Arnold

Christopher Arnold


For personal finance, there is a variety of information you should understand but the two pillars are cash flow and net worth.

Cash flow is simply what is coming in versus what is going out. It should be a positive number in order to have your finances in order. The bigger the positive number, the more opportunity there is for the individual to save and grow assets.

Net worth is calculated by adding together all of one’s assets and subtracting all debt. It indicates whether you are ‘getting ahead’. Over time, by saving and growing as...

A key to improving and maintaining your finances is getting financially organized. Start by taking an inventory of different aspects of your finances, including income, spending, debt (aka liabilities), investments and other assets, insurance policies, estate planning documents and special circumstances that are unique to you.

Income – This means income from all sources including your salary, bonus, social security, investments and alimony.

Spending – You want to know where your money is going. Not everyone has the patients to tr...

To enhance your financial condition, focus first and foremost on what you can control. Start by getting fiscally organized.

Whether you work with an advisor or go it alone, here are four key areas to address annually that will help keep you focused on what is important:

Goals and Objectives

Where are you going? As the Cheshire cat said to Alice, "If you don't know where you're going then any road will do." Without direction, without a destination, without a goal, how do you plot a cou...