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October is good time to evaluate personal finances

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Peter Dunn, Special for USA TODAY
Published 7:30 a.m. ET Oct. 14, 2017

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I don’t know when you get introspective about the quality of your finances in a given year, or if you do it all.

It seems that most people self-evaluate late in December, while others make judgments about the previous year in January.

But, if you want to actually swoop-in and save a year, and have the chance to turn lemons into lemonade, it’s best to take stock of your victories and losses around the start of October. If you do, you’ll have a chance to right potential wrongs before it’s too late.

What I’ve witnessed over the last couple decades of financial advising is people winding-down their year starting at the beginning of the third quarter, accelerating downhill about Thanksgiving, and totally capitulating as the December holidays hit. 

A financial life spirals slowly out of control when you never take the time to assess your recent reality. One year bleeds into the next year, and those resistant to introspection find themselves digging a deeper hole.

The whole idea of evaluating your financial year is admittedly odd. Frankly, “nothing bad financially happened to me” often feels like a major victory and, in certain circumstances, it is. However, evaluating your finances based on things that didn’t happen doesn’t exactly ring of a sustainable evaluation strategy. 

Do what I do every October: Examine the previous nine months so you can help better guide the final three months of the year.

Begin from afar. How many months, of the nine so far, did you win? A win is when you have a surplus at the end of a month. If you made more money than you spent, you won that month. If you spent more money than you made, then you plowed through your savings or went into debt. That’s a loss. 

Nine months into the year, what’s your score? 4-5? 6-3? 0-9?

Take note of whether you have any natural momentum. For instance, if your months have improved over the course of the year, that’s great positive momentum. Your aim is to keep it going. If the year has gotten more difficult as it’s progressed, then you need to figure out exactly why and exactly how to reverse the pattern.

Next, examine your monumental moments for the year, both good and bad. Did you pay off a major debt or hit an important savings goal? Did you experience a financial emergency or obligate yourself to a debt payment via poor decision-making? List your top three financial moments and your worst three financial moments. Ideally, your top three moments created stability, as opposed to net worth non-events.

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The next task is challenging. You need to objectively evaluate how much luck was involved with both your greatest moments of the year and your worst moments. If you fear you have too many biases to make a ruling, ask your best friend to weigh-in.

As an example, getting your car rear-ended at a four-way stop is bad luck. Whereas needing new tires on your car after 50 thousand miles of use, is not bad luck. It was inevitable. You may have just not been prepared for it. Figuring-out that your bad moments were ones that you should have been prepared for but weren’t isn’t fun. But if you’re able to acknowledge this reality, then you’re on the road to preparing for what’s next.

If the preceding exercise has you hanging your head, then you now know why I want you to do this in October and not December or January. Unless you intentionally set out to correct ugly personal finance trends, they will continue.

If you want to make a change, now is the time. If you wait until the end of the year draws closer, you’ll be in trouble. Spending hits its peak from Thanksgiving through the end of the year. If you want to rack up wins, or even the score, start now. 

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Peter Dunn is an author, speaker and radio host, and he has a free podcast: Million Dollar Plan. Have a question about money for Pete the Planner? Email him at AskPete@petetheplanner.com

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