DIY Financial Report Every Year! Are We Crazy?

When my wife and I were engaged we had two sets of finances and goals.  We decided to have a "finances day" to discuss, among other things, how we planned to combine our finances and what our short and long term financial goals would be for our married life.  When I was researching on how best to accomplish our financial goals, almost every article I read recommended having a written financial plan.  There are a lot of good reasons to have a written plan, but the argument that made the most sense to me was that people are prone to prioritize the "needs" and wants of today and to lose sight of anything long term.  A written plan helps to align short term spending and savings with sometimes abstract long term goals (like saving for college or retirement).

A text exchange between my (future) wife and I, 

I knew I wanted to write out our financial plan, but most of the advice I read was to have a financial adviser prepare one for you.  Don't get me wrong...a good fee-only financial adviser can be well worth the cost.  However, at the time, I did not see much benefit to one.  We had very little money invested, no real debt, and our future income and expenses were very uncertain.  I had a hard time finding any examples of what a financial plan looks like and what information is important to include.  Since we were just starting out, I was also reading everything I could on personal finances and investing.  One idea that I really liked was to treat your personal finances as if you are the CEO of a company.  The main idea being that, like a CEO, you should account for your income, debt, and spending and you should work to reduce costs and maximize profits.  With this in mind, I really liked the idea of our financial plan being modeled after a stockholders financial report, written for my wife (the majority stockholder).  But I looked at a few stockholder reports and other than the financial statement (debt, assets, income) there was little information that correlated with our own personal finances.  

Then I read some of Warren Buffett's annual shareholder letters and thought they would be a great model for our annual report.  Many people (including Bill Gates) recommend reading them as they are well written and easy to read even for a financial novice.  The letters are not just a report on the performance of his company Bersher Hathway, but they also give a fantastic learning tool from everything from accounting to investing, critical thinking, economics, and business.  

My plan was to model my writing after the conversational writing of Buffett.  I went through every aspect of our financial life and came up with the following table of contents for each major area: 

  • Goal Review and New/Updated Goals (everything from what we want to achieve this year to what we want in 50 years, including financial, personal, and career goals)

  • Financial Summary (i.e. debt, assets, income, spending, and net worth)

  • Investments Summary (i.e. investment strategy, historical performance, and retirement predictions)

  • Taxes Summary (i.e. strategies to minimize taxes) 

  • Insurance (i.e. current coverage and risk tolerance)

  • Car Summary (i.e. cost of ownership and review of previous purchase decisions)

Unfortunately, my technical side has heavily influenced my writing of our annual report.  Our reports are anywhere from 12 to 20 pages long and tend to read like a dry stockholder report, something that I had hoped to avoid.  This is one of the reasons I started blogging, so that I could "find my voice" and better explain our financial decisions in my writing.  That being said, writing our annual report was one of the best financial decisions we ever made.  It has become our financial reference manual and invaluable resource.  When I finish each year's report, my wife and I have a date night.  She will read the latest report and it starts a lot of good conversations about our goals, successes, and failures.  I credit the process of reviewing our entire financial life every year with the great financial foundation we have laid.  As a result of this frequent review, we often update our strategies and it is rare that we do not achieve our various goals ahead of schedule.