Financial Habit: Review Regularly
By Leo Babauta
The final key financial habit that should be formed over time, to get a strong hold on your finances, is a regular review.
Let’s say you’ve been getting your debt payments under control, and have started saving, and basically have gotten started in the right direction. This is amazing, but finances don’t just go on autopilot forever. You need to review.
Why do you need to review regularly? A few reasons:
- Your income might fluctuate, or change for some reason, and so your savings/debt payments should be adjusted.
- Bills might be added, or you might add a new credit card, which means you should reassess your setup.
- A debt might be paid off, in which case you should move the payments that were going to that debt to another debt.
- An irregular expense might come up (an unexpected medical bill, for example) that means you need to temporarily adjust your payments.
- You might be overspending on certain areas, like shopping or travel or eating out, and need to cut back.
Finances are reglarly in flux, so a review is smart. However, it doesn’t need to take long or be difficult.
Here’s what I suggest:
- Put a weekly reminder in your calendar to check your account balances — I like to use Mint.com, where I give it access to all my accounts, and can check everything in one glance. In this weekly review, you’re just spending a few minutes to make sure that everything is OK, that you don’t have a negative or extremely low checking account you should be aware of, etc.
- Put a monthly reminder in your calendar to review your debt and bill payments, savings, and spending. This also doesn’t have to take too long — just make sure everything is set up OK, that you’re not overspending, that no adjustments need to be made to any of your regular payments. If a debt is paid off, move that money to another payment.
- Every 6 months to a year, do a big-picture review, where you decide on a rough plan for your finances. Do you want to put more in retirement and spend less? Are you on track to get out of debt? Are you spending too much on auto or housing and need to make an eventual bigger change this year (sell a car, move to another house)? It doesn’t have too be too tough, but set aside a chunk of a couple hours to give your finances some thought, and discuss with your partner if you have one.
Don’t make this into a big deal — if you think it’s difficult, you’ll dread it and will put it off. If you just see it as a regular, easy thing (as simple as checking Facebook and Twitter and email), then you can knock it off your list in a few minutes and feel good about how things are going.