How to conduct early retirement performance reviews that work

There is no secret that the performance review was one of those things that I absolutely hated during my working career. They were mind-numbing. Nobody truly cared. Yeah, even management.

It was a check in the box, nothing more. Most of us put as little effort into them as we could. Even managers would half-ass the process.

In other words, I really didn't like those things.

But, I do believe that there's value in the concept of a performance review if they are conducted in a meaningful way. And, they actually mean something to the person being reviewed! Meaning, they get something out of it.

Reviewing our performance gives us time to reflect on the progress that we've made in the past and where we want to be in the future.

In this case, it's sort of like a lifestyle performance review.

They give us the opportunity to decide what's working and what isn't. And, we get to take a critical look into our accomplishments, and that helps to improve our outlook for the future.

Our outlook gives us purpose. And, purpose is required in early retirement.

See how all this stuff comes full circle?  :)

How can we use the concept of a performance review in early retirement so it's something meaningful and worth our damn time?

How to design early retirement performance reviews

Early retirement performance reviews consist of three key elements:

• Examining what's going on NOW
• Deciding on your goals for the FUTURE, and
• Ensuring that you're not running out of MONEY

Let's take a look at each one, below.

What's going on now?

In my first ever early retirement performance review, I examined a few key areas of my life.

• I reflected on what kept me busy during the day
• I took an honest look at our financial situation
• And, I confirmed that our lifestyle still makes me happy

Ultimately, those three key areas cut to the heart of early retirement at its core. Performance reviews review your purpose, finances and happiness.

Write these down. We need answers to basic questions, like:

• What fills my day?
• Am I happy doing those things?
• Do I feel anxious about anything? If so, what?
• Is there anything missing from my day-to-day life?
• What were my major accomplishments this year?

In other words, what happened over the past year? Am I generally happy? If not, why not? What's the problem? Use these shortcomings to plan for your future goals, which is something that we'll talk about next.

What do you want to do in the future?

The other major element of your early retirement performance review consists of your goals for the future (I didn't really address those in my first performance review). Well, not entirely.

My primary goal was to maintain my level of happiness, but that doesn't really answer the question. It's not specific enough.

Try putting "Continue doing good work" down as one of your corporate goals. I tried that once and, umm, it didn't fly.  :)

The best goals are specific and measurable.

What’s the difference between these two goals:

“This year, I want to lose weight and get into shape“, and

“This year, I want to lose 30 pounds and run 5 miles without stopping.”

The difference is simple: One of those goals is almost guaranteed to fail, while the other will set us up for success. I’m sure you can guess what goal is the better one.

“This year, I want to lose 30 pounds and run 5 miles without stopping.”

This is the better goal because it’s specific and measurable. We have hard numbers to aim for and, more importantly, we know when we’ve accomplished that goal.

Do you want to learn a new craft? Say, woodworking? Plumbing? Hell, maybe you want to start playing more video games with your kids?

Whatever it is, be specific. Ensure your goals are measurable. Then, be prepared to reflect on how you did on next year's performance review.  :)

And remember - if there were things that didn't go right during the past year, use those points as the foundation for your goals for next year.

Are you running out of money?

The last element of your early retirement performance review is money. If you're spending 4% of your net worth according to the Trinity Study, are you running out of cash too quickly?

Or, maybe you under-estimated the amount of money you can spend. Yes, it's possible to spend too little in early retirement.

If you don't know how much money you've spent over the past year, sign up for Personal Capital or Mint and make sure these calculations are easy. The easier they are, the more likely you'll keep up with them.

The only way to make an educated decision about your financial picture in early retirement is to understand how much you've spent relative to how much money that you have. It's that simple. Don't overcomplicate this stuff.

If your net worth decreased during the previous year, consider making changes. But, also understand WHY.

Did the market tank, or did you simply spend too much? Were there unexpected expenses during the year? If so, was your emergency fund sufficient enough to cover those expenses?

You know the drill. Are you sittin' pretty on a nice nest egg, or is there a problem that needs to be addressed before running out of cash?

That's it!

Performance reviews definitely have their place. In early retirement, they provide early retirees with an opportunity to reflect and reconsider their lives, improve on shortcomings and make sure their financial picture continues to look solid.