Without conducting an accurate poll, I suspect that most people wouldn’t want to spend their downtime tracking their finances. I mean, wouldn’t you rather catch up with friends, play with your kids, or cheer on your favorite sports team. Of course, you would. But, this is just one of those necessary evils we all must do to prevent a chaotic and stressful life, as well as protect your financial future.
If it’s any consultation, though, staying current with your finances isn’t all that tedious and time-consuming once you’ve put the ball in motion.
Write out your goals.
Writing down your goals is a powerful strategy. At least that’s according to a study done by Dr. Gail Matthews, a psychology professor at the Dominican University of California.
Mathew’s sample included men and women from various walks of life, ranging in age from 23 to 72. One group of participants wrote down their goals while the other didn’t. The results? Participants who wrote down their goals were more likely to meet those goals. In addition, writing down your goals and dreams daily increases your chances of achieving them by 42%.
Why? Maybe it’s because this makes intangibles more tangible. Additionally, writing the goal helps us remember and keep goals at top of mind and be a second visual reminder.
In short, identify what financial priorities you want to focus on and write them down as thoroughly as possible. Sure, the most common financial goals we have, like buying a house, starting a business, retiring early, involve long-term planning. Nevertheless, the first step in any plan is to determine your target.
And, if writing down your goals isn’t cutting it, then share your goals with others. Matthews also found that 70 percent of participants who reported weekly progress to a friend reported successful goal achievement (completing their goal of being more than halfway there). In contrast, only 35 percent of participants who kept their goals to themselves could find some portion of success.
Make a realistic plan.
Now that you’ve written or shared your goals, now want to carve out a plan. But, often, this can be tricky. As Rick Hanson once said, “The goal you set must be challenging. At the same time, it should be realistic and attainable, not impossible to reach. It should be challenging enough to make you stretch, but not so far that you break.”
What’s more, a good plan takes into account both short-term and long-term goals. And, don’t forget to include various checkpoints and rewards along the way. With checkpoints, if you have set back, you can still track the progress that you’ve made to keep you motivated. Likewise, if you fall down a few rungs — you’ll still see the progress you’ve made.
Having a plan increases your chances of success by over 30%. In addition, by creating short-term and long-term goals and prioritizing their importance, you can simultaneously track the results and successes of multiple goals.
Live on less than you earn.
The good news? 80% of people have a budget. The bad news? Most of us overspend by $7,400 a year.
Considering that nearly 40% of Americans with annual incomes over $100,000 live paycheck-to-paycheck, this shouldn’t be taken lightly. Thankfully, there are effective ways to ensure that you live beneath your income;
- Follow the 50/30/20 rule. Here you simply divide your after-tax take-home income into the following three categories; 50% on essentials, 30% on wants, and 20% towards savings.
- Automate your savings. Have a percentage of your paycheck automatically deposited into a dedicated savings account.
- Start owning and stop owning. If you can’t pay off a credit card balance, then don’t charge items on it.
- Eliminate frivolous spending. I’m talking about the gym subscription you don’t use, buying lunch every day, or only buying new.
- Don’t keep up with the Joneses. Stop burying yourself under debt because of FOMO.
- Keep on paying yourself first. If you’ve managed to pay off your debt, put that money into an emergency fund or interest-bearing savings account.
- Delay gratification. “Being able to delay satisfaction isn’t the easiest skill to acquire,” writes Ilene Strauss Cohen, Ph.D. “It involves feeling dissatisfied, which is why it seems impossible for people who haven’t learned to control their impulses.”
- Change the nature of your debt. Contact your lenders and ask if you can receive a more favorable interest rate.
- Boost your income. If you have the availability, find an additional income stream until you’ve reached your financial goal.
Enroll in paperless billing.
Want to reduce the amount of clutter in your life while also guaranteeing that you’ll never miss a payment again? Opt to go paperless wherever you can. Getting less correspondence from retailers and creditors means you can stay organized without dealing with an endless pile of paperwork. And, it’s also a simple way to be slightly more environmentally friendly.
Furthermore, you should set up auto-payments. If you’re worried that you’ll forget about this, have one bank account that you use only for bills. This way, you’ll have the funds in this account to cover your bills without getting hit with an overdraft fee.
Keep all of your bills in one place.
Even if most of your bills are delivered electronically, you still should have a space for bills that arrive in your mailbox. For example, property tax and homeowners’ insurance bills are usually mailed to you on an annual or quarterly basis. You’ll also receive occasional expenses, such as medical tests or home repair bills — through snail mail.
Keeping the bills close to your desk, or wherever you usually write a check or pay bills online, will help you remain organized. Simple filing cabinets or a few folders will suffice.
Since most people now pay their bills online, shredded paper statements and online records are becoming the norm. For tax purposes or just to be safe — you can keep any essential paper records in this filing system. You can also scan them and store them online if you like as well.
Take charge of your debt.
You should set your debt repayment goals as one of your top priorities. After all, the average American debt among consumers at $92,727. Now, to be fair, not all debt is bad. For example, student loans, a mortgage, or starting your own business are examples of good debt. But, at the same time, carrying too much debt can be detrimental to your health and well-being and prevent you from reaching goals like traveling or retiring early.
When you have a lot of debt, it can be overwhelming. However, developing a debt-reduction plan can make this more attainable. For example, rather than paying the minimum payment on all your debt at once — concentrate on paying off one bill. Paying your debts that have the highest interest rates or the most toxic properties should be addressed first.
After the first debt is paid off, move on to the next and apply the same concept. Paying down debt in this way is often referred to as the “snowball effect,” and it can be extremely helpful in minimizing the debt you own.
Save a little.
Is your center console littered with coins? Are you constantly finding $5 bills in your jeans or jacket you haven’t worn since last year? Put them into a savings account, along with a few extra bucks from each of your paychecks. These micro-deposits won’t be missed. And, they can be used for a dream vacation or emergency fund.
I’d also suggest that you download round-up savings apps. Some examples would be Acorns, Chime, Qapital, or Digit.
Keep your receipts and review them weekly.
Keeping track of your expenses goes hand in hand with keeping track of your income. As such, make a habit of saving receipts instead of choking them into the trash. Then, once a week, review them to analyze your spending habits.
There’s another benefit of frequently gathering and organizing your receipts. When tax season arrives, you’re already ahead. Knowing precisely where your receipts are means you won’t waste time frantically searching for receipts that you need to claim a deduction.
Use a financial app.
Financial software isn’t just limited to investing. You can find free budgeting apps online that can assist you in keeping track of your daily, household, or business expenses. Make sure the budgeting app you’re thinking about has a good reputation with customers by checking its ratings in the app store or checking the Better Business Bureau site.
Review at the end of the month.
Calculate your total expenses and your total income to determine whether you’ve over-or-underbudget for the month. Take into account where you spend your money. Is there anything you can cut back on? Have you earned as much as you have in the past? Assess your earnings and make wise money decisions moving forward.
Keeping track of your personal finances is easy when you follow these tips. And, it also ensures that you’ll be consistent in your efforts to stay on top of your finances.
