21 July 2019

How to Build a Financial Dashboard

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Statements, reminders, updates, forecasts and tax returns: All of these financial records proliferate like spring dandelions. As you’re tidying up in the aftermath of income tax season, consider creating a "dashboard" of key metrics. A dashboard organizes these metrics and puts them in one place, usually on a spreadsheet, so you can easily track how your financial life is progressing.  Financial advisors say a useful dashboard should have no more than nine categories, or columns, and should be contained to a single page or screen. If you want to add more detail, add additional pages with supporting calculators and documentation, instead of extending the first page of your spreadsheet into infinity. You’ll want to categorize your key headers into these buckets, advisors say:
  • Savings and investments
  • Debt reduction
  • Life goals and transitions

What not to put on the dashboard, according to financial advisors: short-term savings. By definition, that pot of money is available as needed, and the point of the dashboard is to track long-term progress. Expect to update the dashboard at least a couple of times a year, probably when you have a pile of statements to review, advisors say. Alternatively, if you have a major life transition, such as going back to work, getting married or you have medical expenses, you will want to adjust the dashboard accordingly.

Here’s how to design a basic dashboard. 

Track how much you are saving and how those investments are growing in two separate columns, advises Robert Laura, president of Synergos Financial Group, based in Brighton, Michigan.  Create a separate column for your 401(k) contributions and the growth of your 401(k) account. Park other investments in their own columns, grouped by category (one column for mutual funds, another for alternative investments such as gold, and so on), advisors say. This lets you see how each category is contributing, so you are less likely to fixate on a certain holding within that category.

Integrate a couple of forecasting tools that can help you project the future value of today’s portfolio. One to consider is the CoRi Retirement Index offered by BlackRock. Another tool that can help you estimate what you’ll need is the “Choose to Save” estimator, recommended by Joseph Montanaro, a certified financial planner on staff with insurance firm USAA. Castille also recommends using a Social Security calculator so you can track the likely income from that source, and as well as a subtotal so you can see how it all adds up to regular income after you are retired.

Most people want to eliminate debt before they retire – typically the mortgage, although consumer and student debt are also targets for elimination. Watching your outstanding debt evaporate is not only satisfying, but it also helps you see how the overall picture is shifting as you can direct more money to saving once certain debts are gone, Montanaro says. Finally, include a couple of columns for professional and life-stage milestones as your circumstances change.

Ramping up a side venture to a retirement occupation takes time, effort and money, Laura points out. When you put your entrepreneurial effort in the context of your overall savings goals and likely retirement income, you can see how much you will need that side income and how much effort it requires before you retire. If you aim to buy a vacation home, get plastic surgery or indulge in another costly retirement-transition expense, save for that separately so you can insulate your core portfolio from your splurge, Laura adds.  

Finally, top off your dashboard with some virtual stickers. Montanaro suggests inserting photos of grandchildren, golf or other images in the headers, whatever triggers your aspirations, to make your dashboard inspirational as well as functional.

Click here to access the full article on U.S. News Money.

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