My wife and I spent last Saturday conducting our family’s 2023 Planning Meeting. It included a full financial audit and family review.
And I want to share it all with you here.
Before I get to the content, I need to answer the question: Why share this experience? It’s very personal.
There are two reasons:
First, I spend every day helping families understand and optimize everything in their lives with a dollar sign attached to it. That includes goal setting. If families are going to let me in, it’s only fair that I open the window into my process as well. Always practice what you preach.
Second, this exercise was extremely helpful to our relationship. We feel aligned and ready to attack whatever is in store in 2023. If this encourages you to start an annual audit and planning meeting of your own or hire someone like me to help get you aligned, it’ll be well worth it.
In fact, we’ve had two expenses pop up since we met last weekend (because, life!). Our dryer went out and we had to have it repaired, and one of our car tires had a leak. But because we had planned for the unknown, we felt a lot better about these pop-up expenses.
If this encourages you to start an annual audit and planning meeting of your own or hire someone like me to help get you aligned, it’ll be well worth it.
Values Statement
Before we could even start our audit, we had to understand what drives us. To answer that, we asked three simple questions. The only rule was that no goal was too big.
What are your values / what is most important to you?
What are your long-term and short-term non-financial goals
What are your long-term and short-term financial goals?
Answering these questions, along with conversation around each answer, gave us a glimpse into what the Coley family needed to prioritize. For us, the values statement reads like this:
“To grow in our faith while helping others do the same, prioritizing family, marriage, and the growth of our children in a godly household. We want to surround ourselves with the right community, while enjoying work and excelling professionally.”
I love this. It’s now taped to our fridge. All decisions going forward should align with that statement.
I won’t share all of our goals, but here are a few:
Non-financial:
- Have a marriage that grows and matures
- Own a business
- Spend daily time in the Word
- Go on one date a month
Financial
- Give generously
- Travel regularly
- Join a golf club
- Have a comfortable and timely retirement
- Earn a promotion in the next year
Setting this foundation gave us vision to look at our entire financial picture with new eyes. Every decision we made the rest of the day aligned with what we decided in this first step.
Financial Audit
This should be treated like a “financial state of the union.” It’s an overarching look at every aspect of our financial situation so we can be on the same page and identify potential problem areas. I’ll break this down by category.
Protection
Home Insurance
We just moved into our new home in July, so our insurance is pretty new and reflective of the housing market in Summer 2022. The big thing to watch is if your Coverage A (Dwelling) is less than the replacement value of your home. Our Coverage A (Dwelling), B (Detached structures), C (Personal property), D (Loss of use or access to dwelling), E (Personal liability to others), and F (Medical payments to others) are all in a good spot. We’re also happy with our deductible and cost of insurance. We’ll leave this as is.
Car Insurance
Our car insurance is comprehensive and adequate at the moment. We bundle it with our home, so we get a little discount. We’ll save even more money when my speeding ticket from 2021 rolls off!
Jewelry Insurance
We have a few pieces of Chloe’s jewelry insured. The coverage is still in line with the replacement amount. It’s attached to our home insurance and is reasonably priced.
Umbrella Insurance
We added an umbrella policy to our home insurance in 2022 for a few hundred bucks a year. The coverage amounts fit nicely with our home insurance Coverage E. No updates are needed here.
Term Life Insurance
We both purchased 30/year-term policies in 2021 and additional policies in 2022. Our policies now cover 10x our income plus the mortgage on our home. With two kids at home, having this protection is necessary. After the term expires, we expect to be self-insured.
While the policies are in good shape, we found that we missed updating my beneficiaries to include our new son as a contingent. I went ahead and fixed that oversight.
Health
Health Insurance
Because we both work at smaller companies, we have independent health insurance. We’re on a High Deductible Health Plan that allows us to contribute to an HSA. After looking at alternatives, our current plan is still the best option for our family. We’ll reevaluate in November during open enrollment.
Health SAvings account
We’re currently contributing the deductible to the HSA each year and investing anything over and above that inside of the account. It turns out that having a baby is expensive, so the balance dwindled some in 2022. We hope to make up for that this year.
Financial planning
Credit Card Rewards
We’ve been using the Southwest Rapid Rewards card for the past few years, which gives us one mile for every $1 spent. After doing some research, we found the Capital One Venture card would give us two miles for every $1 spent. It’s $95/year, but I’ve learned that you can get the fee waived if you call and ask. We decided to make the switch but will hold on to the other card to boost our credit score.
Savings Rate
Our bank offers a low-interest rate on savings accounts (0.05%). Some banks currently offer an interest rate of 4%. If I moved my emergency fund over to a high-interest-rate account, it will still be guaranteed, and we would make a few hundred bucks a year more in interest. This is an easy win. I’ll find a bank that offers a solid interest rate with flexible withdrawals, no fees, and no hidden rules and use it for our emergency fund.
Mortgage
Because we purchased in July, our interest rate is 5.25%. With rates currently above 6%, there’s no reason to refinance right now. We’ll look into it if rates creep near 4% down the road.
College Savings
With rates currently above 6%, there’s no reason to refinance right now. We’ll look into it if rates creep near 4% down the road.
One of our big goals is to provide the best education to our children. This means saving money for their college. We’re currently on track to fund most of their college through 529 savings, so no changes are needed here. If we have a third child or use some of the 529 to pay for K-12 expenses, we’ll need to re-examine this.
Retirement Planning
All of our current retirement plan contributions are going toward a Roth. After doing some analysis, the Roth is still the most tax-efficient vehicle for our savings. We should make more money this year, but a second daycare payment is working against us. We won’t increase contributions at this time.
We did, however, find that our youngest son had not been updated as a contingent beneficiary on our workplace retirement plans, and fixed this mistake.
Estate Planning
We wrote our estate documents (will/financial durable power of attorney/healthcare power of attorney) after our daughter was born through the online website Mama Bear Legal Forms. I read through the documents and found they still apply as our beneficiaries include any future children. No changes are needed here.
Giving
Going back to our values statement, giving is something we feel strongly about. Due to increased income last year, we agreed to increase our monthly giving to our church. We also took a hard look at the organizations we donate to and decided to pause support on one because we feel called in another direction.
UTMA Savings
Chloe and I decided to save a little money each month for our kids to kickstart their adult lives. This has to live outside of a 529, as it won’t be for college expenses. I anticipate it helping with a down payment on a home or a car. Our daughter’s account is being contributed to monthly, but we hadn’t gotten around to opening an account for our four-month-old son. We’ll make that happen and start contributing.
Autos
We have two cars:
· 2014 Jeep Grand Cherokee (150k miles)
· 2016 Ford Explorer (110k miles)
Based on averages, my Jeep should be okay for another two years, and my wife’s Explorer for another four. Our window for a new car will open in 2025 assuming nothing major happens before then. Because of that, we need to start earmarking some savings each month for a new vehicle.
Asset Allocation
Over 85% of our liquid assets are in stocks, with the remainder in cash. These investments are spread out between funds and individual securities. With no near-term expense on the horizon (buying a house, for example), the allocation fits our time horizon, risk tolerance, and goals.
The strategies we are invested in were down in 2022, but that is par for the course. We still believe we are invested in quality assets and trust the long-term process. I’ll continue the due diligence into alternative investments and make a change if need be down the road.
Net Worth
Next we examined our net worth. There isn’t really an action item here as much as a check-in to see if we were progressing in the right direction. To arrive at our number, we added up all of our assets (including retirement funds, home, bank account, and cars) and subtracted our liabilities (monthly credit card balance and mortgage). We’ll continue to track this to see how it trends over time. Our net worth had increased from last year which was nice to see.
Budgeting
After we looked through our financial picture, it was time to set our budget for 2023. To do that, we comprehensively examined our spending in 2022. It turns out, we spent more on restaurants and spur-of-the-moment purchases than we wanted to (does anyone else run an Amazon distribution center out of their home?). I even noticed that we spent $20/month at gas stations, something we can easily cut out.
Click: How to Build a Budget
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Click: How to Build a Budget 〰️
We then calculated our fixed expenses first (mortgage/home insurance/daycare/etc.) and added the necessary variable expenses after (grocery/restaurants/haircuts). Next, we played with the numbers until we arrived at something that was achievable, but still allowed us to be prudent saving for the future. Finally, we made it a goal to wait until the end of the month for any unnecessary purchases. Hopefully that helps decrease the “spur-of-the-moment” expenses from last year.
We’ll continue to re-evaluate the budget throughout the year as needs/incomes change. We also agreed to have a weekly check-in on Sunday nights after the kids go to bed to take note of where we are in the budget and plan for the next week’s expenses.
Family Review
Because this conversation was so important to our family, we wanted to make the day as fun as possible. So we dropped off the kids earlier in the day, scheduled a reservation at a new restaurant in town and decided to have a staycation at a hotel in Franklin.
Once we were seated at the restaurant, we started the second act of our meeting: the family review.
A friend of mine sent me a document he created that asks great questions to jumpstart discussion. During dinner, we talked through a bunch of questions to review 2022 and plan for 2023. Here were some of my favorites:
What are five things that fill you up? How about drain you?
What was the hardest moment of last year? Why?
What was the worst financial decision we made this year?
What was the biggest ‘win’ from last year?
What are five things you are thankful for?
What’s not working right now?
What did you start in 2022 that you need to continue in 2023?
These questions allowed us to see what was going on in our own hearts and in one another’s. It gave us great insight into how great last year was for our family and what needs to change this year. Most of all, it brought us closer as a couple.
And that’s it! Some preparation, three hours of hard work, and good conversation at dinner made this day one to remember. If you are going to do this, I have three pieces of advice.
Make sure all of your financial information and decisions are accurate and structurally sound. As a silly example, you could both be totally aligned that you should take all of your money to Vegas, but that doesn’t make it the right decision. If you’re not comfortable or don’t have the time to walk through the data and decisions yourself, make sure you hire someone you trust to guide you through it.
Have an open mind. My wife and I both had our own preferences going into the conversation, but made strides when we reached across the aisle and compromised. Because of that, we both feel we are pulling the rope in the same direction going forward.
Lastly, make this day as enjoyable as possible. We took a break halfway through and had coffee and Crumbl Cookies. We listened to music as we worked. We ate at a cool restaurant. Pairing this conversation with a fun day not only makes it more enjoyable, but it also increases its productivity and effectiveness.
If you want a deeper dive into how I prepared for our session or the questions we reviewed together, I’d love to chat. Find some time on my calendar below
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