If you don’t pay attention to your finances then you’ll find yourself in overdraft and/or debt. I’m not asking you to spend an hour a day on your budget but there are times we need to pay attention to money. Here are 10 ways we pay attention to money and how often we review them:
1) Check budget categories BEFORE SPENDING
Want to blow your budget? Don’t check your available balance.
Want to control spending and live within your means? Check to see how much “means” you have before spending.
I use YNAB’s mobile app. It is tied into our budget and keeps in informed on every spending category.
How much can we spend at Kohl’s? Check YNAB.
Can we fill up the tank on the 28th? Nope, but we can put $15.00 in until the 1st.
The remaining balances on ALL our budget categories are available at the touch of a button.
Cash envelopes work even better. Take $150 to the grocery store and you won’t spend $170. Once the envelope is empty, it’s empty. It’s a great way to trick yourself in to spending less than you make.
Watching available balances go down might sound depressing but you win if there is even $.01 left at the end of the month. Good job!
2) Enter transactions into the budget DAILY
The only way to know how much money is left in each category is by entering each transaction into our budget.
Again, I use YNAB’s mobile app (for IOS, but also for Android) to enter transactions from anywhere – even at a gas pump. Once the pump shuts off I enter the total, click Save Transaction and the YNAB Cloud magic takes care of the rest.
This also helps save tons of time on the next step:
3) Balance our bank account MONTHLY
I used to balance my checkbook with an actual checkbook. I waited for the bank statement to arrive in the mail, matched each transaction against my checkbook register, and prayed I had accounted for it all correctly.
We still follow the same process but in an electronic fashion – and it’s much faster! I match each transaction in YNAB against my bank’s online statement within about 10 minutes.
The benefits of balancing your bank account monthly is:
- Ensure all transactions have been recorded
- Verify the correct amount was recorded
- Identify any fraudulent charges
My wife’s debit card number was used to buy $55 worth of diesel gas at 1:30am in December. I can PROMISE you she wasn’t pumping gas into a semi at a truck stop in the wee, early hours before Christmas. I called our bank, they shut down card down, and we received a full refund within a few hours.
If I weren’t for balancing the checkbook then we may never have caught it in time. There is nothing we can do to keep our debit card numbers from being compromised so it is up to us to make sure to notify the bank if they haven’t already caught the fraudulent activity. Balancing the checkbook is just one more way to fight charge card fraud.
4) Set up MONTHLY budget
Decide how much money should come into the household next month and then decide how that money is going to be spent by creating a monthly budget.
Why monthly? Why not weekly? Wouldn’t it be easier to budget every paycheck instead? The answer is simple: Most household bills are monthly:
- Rent or mortgage
- Cell phone
- Tuition or daycare
Then there are the one-time expenses like:
- Tags/License plate renewals
Who wants to have a budget meeting 2-4 times a month anyway? Grab your calendar, sit down with your accountability partner, and plan out your month. It gets easier after a few months.
5) Review investments and retirement savings QUARTERLY
It doesn’t hurt to look at your 401(k) balances every three months but watching the market daily can be hazardous to your wealth! Don’t make a decision based on what the market did today – you want to buy and hold mutual funds for a period of time.
I review our balances every three months to see where we are financially. It reminds me why we put so much money into savings and encourages me to keep going – even when the market is bad.
Since I can’t time the market I keep putting money into retirement plans bi-weekly and long-term savings monthly – and we’ve more than doubled our net worth in the past 8 years. #BAM
6) Rebalance portfolios and contribution amounts ANNUALLY
Similar to #5, I review how much we put into our accounts and decide to move things around once a year. I ask myself these questions:
- Are the investments we are in still valid?
- Should we put more money into this account or that account?
- Can we save more this year?
I am comfortable making decisions in my wife’s 401(k) plan but we confide in a financial advisor for the rest of our family’s goals. Three heads are better than one.
7) Reassess Emergency Fund balances ANNUALLY
It’s good to review the emergency fund from time to time. Is there enough in the account? How much is enough? How much is too much?
If you’ve never calculated how much you need in an emergency fund then listen to How Much Should You Have In An Emergency Funds:
8) Review Charitable Giving categories during TAX SEASON
The best time to review our charitable giving is when all the statements are out on the table while I’m doing our income tax return:
- Did we tithe? (10% of our gross income to our church)
- Have we been giving enough to other charitable organizations? (Sponsored child, Humane Society, Veteran’s Association, etc…)
- Is there another cause we could be contributing to?
I will admit that we could be giving more. Maybe I should turn this into a semi-annual review…
9) Think of money-saving ideas as they come up
We can talk about clipping coupons and shopping for deals all day long but I’m talking about those unusual situations when we start shopping for something new or replacing something old:
- Can we get a better cell phone package when the contract expires?
- Should we get rid of the home phone to save on the home entertainment package?
- Who can get us the best deal on replacing the deck?
There’s no regular schedule for these types of things but it is smart to consider ways to save money before committing to a large purchase or recurring expense.
10) Make smart decisions when a Life Event occurs
Life changes, so will our finances. You can’t plan ahead for Life Events, they just happen:
- My wife changed jobs. How is the benefits package different?
- Is the car insurance sufficient when we get a new vehicle?
- New babies: Put them on your health insurance plan and add them as beneficiaries (and dependents on income taxes)
I can’t predict when Life Events will occur – I can only plan for them with an emergency fund, a clear head, and wise council if needed.
BONUS #11) Create a Net Worth Statement – whenever you want
I can’t believe I didn’t include this in the podcast. Consider this your bonus tip: Create a Net Worth Statement. I keep an excel spreadsheet with a list of all our assets and liabilities and update it whenever I receive a new statement shows up in the mail/email. I don’t review it very often – but it’s there whenever I need encouragement that things are working properly.
Things I include on a Net Worth Statement:
- Value of cars
- Value of art and collectibles
- Value of home (primary residence)
- Value of other real estate
- Value of retirement plans (401k, IRAs, Roths)
- Value of non-retirement investments (mutual funds, stocks, etc…)
- Value of other commodities (precious metals, bit coin, etc…)
- Debts (anything owed to anyone, anywhere)
Have I left anything out? How often do you spend on these things? Let me know in the comment section below.
Watch: How to create a Net Worth Statement (4min video)
Also noted in this episode:
Find older podcast episodes by entering the 2 or 3 digit number after MoneyPlanSOS.com/xxx. For example:
- How much should I have in Emergency Savings – Episode #108: http://MoneyPlanSOS.com/108
- Interview with YNAB’s founder, Jesse Mecham – Episode #53: http://MoneyPlanSOS.com/53
- Inspirational Quotes with Timm Etters – Episode #100: http://MoneyPlanSOS.com/100
BREAKING NEWS: MasterCard extends Zero Liability Protection to PIN-BASED and ATM TRANSACTIONS on MasterCard-branded consumer AND SMALL BUSINESS cards! Read the news release here