Taking Stock of Your Finances to End 2016

As we get ready to celebrate the end of another year, it's common to take stock of our relationships, our health and our finances. Are we where we want to be in each of these important personal areas?

An End-of-Year Checklist for a Better Financial Future

Most people understand that if their financial situation isn't on track, their personal lives can suffer. Money problems often lead to disagreements or fighting with the ones we love, which can damage relationships, cause stress and affect our health. Constant squabbles over money can be the root of a vicious cycle, causing our personal lives to be out of balance.

I work with a number of married couples and others in long-term relationships. Even though most of my clients have plenty of money, from time to time they argue over their finances. "I think we are spending too much money" is the most common complaint I hear. Clients I've worked with for a long time tend to know how much they are spending, but may still feel it's excessive. But when I meet with new clients and ask how much they spend each month, a sheepish look often comes across their faces. The most common response is "we don't really know."

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As you take stock this holiday season and realize differences over spending might spill over into your personal life, consider diving deeper into this issue. Rather than simply making a New Year's resolution to better manage your money, I have three recommendations for 2017 that I have shared with clients to help improve communication and results around their spending habits:

Start the New Year By Tracking Your Spending

Make a list of your expenses. How much are your monthly fixed expenses—those needed to run your household—such as the mortgage and car payments, utilities, food, insurance and taxes? Next, list discretionary or variable expenses. These items include dining out, vacations and entertainment, as well as gifts. Compiling a complete list of expenses will create an important set of facts, especially if you and your spouse's or partner's spending goals are not aligned.

Anyone can track their spending by using software programs such as Quicken or online tools such as Mint.com. Or simply review your monthly bank statements to gather this data. Because most people don't spend the same amount each month—for example, life insurance premiums and vacations may be quarterly or semi-annual expenses—I suggest tracking your expenses for at least three to six months. Don't forget to add in annual expenses such as property taxes, which can be amortized on a monthly basis.

Set Up a Personal Schedule to Discuss Your Finances

Rather than randomly discussing finances when the mood strikes you, develop a schedule. One idea is to set up time quarterly or at least twice a year. During these discussions, evaluate the progress you've made and decide how to refine your spending plan. Putting this discussion on the calendar sets clear expectations for both people and allows a couple to have a calm, less stressful discussion. To make it even more productive, each person should do their homework in advance.

Respect Your Partner's Point of View

Finally, keep in mind we all have unique backgrounds that can shape how we view money, even after years of marriage. I grew up in a small farming town, and the joke was we had more cows than people in our community. We only had one traffic light that just blinked yellow the entire time. Families were considered "well off" if they had a steady job, such as a teacher or office clerk, and the family did not have to worry about their next paycheck.

On the other hand, my husband grew up three hours away in upstate New York, in a town that was dominated by a Fortune 500 company's headquarters. White-collar jobs were plentiful, and most people owned stock in this company, which propelled 401(k) plan values and big bonuses. People that were "well off" were easy to see by the size of their house or the year of their luxury car.

Due to these different upbringings, my husband and I have different views of living for today versus saving for a rainy day. I tend to plan for the unexpected, though my husband prefers to live in the moment. It's not that either of us is right, but each of us needs to understand why we differ and respect those views.

Working together to understand and adjust spending habits will help improve your finances and should lead to a better personal relationship.

I compare improving finances to losing weight. It's a waste of time to weigh yourself on the bathroom scale each morning if you are not dieting or exercising more. If you have financial disagreements or problems, it doesn't make sense to take stock and measure your financial progress if you aren't willing to change any of your financial habits. By regularly monitoring your finances and communicating with your partner, your overall relationship will be better for it.

Where to Invest in 2017

Lisa Brown is a partner and wealth adviser at Brightworth, an Atlanta wealth management firm. She specializes in investment management, executive compensation, retirement transition and estate planning.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Lisa Brown, CFP®, CIMA®, is author of "Girl Talk, Money Talk, The Smart Girl's Guide to Money After College” and “Girl Talk, Money Talk II, Financially Fit and Fabulous in Your 40s and 50s". She is the Practice Area Leader for corporate professionals and executives at wealth management firm CI Brightworth in Atlanta. Advising busy corporate executives on their finances for nearly 20 years has been her passion inside the office. Outside the office she's an avid runner, cyclist and supporter of charitable causes focused on homeless children and their families.