For one, monitoring your finances will help you keep track of where everything goes. The only way that you can be confident about your personal finances is by understanding it completely. After all, you cannot be confident about something that you know nothing about. This confidence will help you make decisions about your finances. It is not really the big decisions that will benefit from it. You automatically allot time to think and plan before going through a big financial decision. This monitoring will benefit the small decisions that you make every day. Buying on an impulse or deciding what to splurge on – these are the decisions that can be influenced by your knowledge of your financial life.
Another benefit that you can get from monitoring your finances is control. You cannot control something unless you know it inside and outside. This control will help curb any unnecessary expense or temptations along the way. It will keep you on track so you can reach your financial goals faster.
This monitoring is actually one of the ways that you can practice financial management. We can even go far as to say that this is what financial management is all about. It is knowing all the details of your financial life and making sure that everything is aligned with your goals and targets.
5 financial areas that you need to update all the time
Now there are so many things about your personal finances that require you attention. Admittedly, it can be overwhelming to track all of them at the same time. While they all deserve your attention, there are only a few that you really have to check constantly. The rest can be checked periodically.
When we say constantly, we mean the financial aspects of your life that you need to look into at least once a month. If you can do more, then that would be better.
Here are 5 details about your financial life that you need to monitor regularly.
Take home pay
Let us begin with your salary. We are calling it your “take home pay” because we want you to focus on the money that you literally take home with you. If your boss offered you $5,000 a month, expect that it will not be the amount that you will really get. You have to factor in your tax payments and other deductions in the picture. Make sure you will not include it when you consider your salary. That way, your budget will not fall short because you will base it on the actual amount that you will get.
The next thing that you need to look into is your monthly bills. An article published on TheSimpleDollar.com revealed the different expenses that consumers spend. From the transportation, food, insurance and pensions, clothing, entertainment, housing, health care, cash contributions and other expenses – it all adds up to $51,100 each year. That translates to $4,258.33 in monthly expenses. You want to consider all of these expenses because this is where your take home pay will go. Think about what expenses are really necessary and what you can let go to make way for a more important expense.
We all have some form of debt. Only a handful do not have them. You need to keep an eye on the balance of your debt – and that means keeping an eye on your credit score. Take a look at your credit report periodically because a single identity theft episode can ruin your financial life. Beyond monitoring your credit report, you also have to monitor your billing statements. The creditor or lender may be charging you with unnecessary fees or transactions. Always stay on top of your finances if you really want to be wise about your money.
This is the fourth aspect of your finances that you need to look into. If you have saving goals (you should!) you may want to constantly monitor it to check the progress that you are making. Sometimes, seeing your progress will give you the motivation that you need. Feel free to open different accounts for various saving goals. That should make it easier for you to monitor it. But of course, we all know that a savings account is not enough. That is why the final financial detail is also quite important.
The final part of your financial life that you need to monitor is your investments. If you do not have one, find a way to start investing. You only need less that $100 to start something – like a website that can help bring additional income. Think about where you can put your money so it will work for you for extra income. That is how you can improve your financial position.
Tips to help you monitor your finances
Monitoring your financial life is easier said than done. But thankfully, there are a lot of tips and tools that will make it easier for you to do this task. Here are some of them.
- Always have a budget plan. This is where it will all begin. If you have to use just one tool, it should be a budget plan. This is where you can plot both your income and expenses. You can clearly see how much money comes in and where it goes each month. This is the simplest tool that will help you make the right decisions about your finances.
- Track your spending. According to an article published on Time.com, 38% of Americans do not track what they spend against their budget. The truth is, a spending plan is not as necessary as a budget plan but it can compliment each other. If you think that your budget is not working and you are still overspending, learning how to track your expenses will help you identify the problem areas in your financial life. This is actually a great activity when you are trying to perfect your budget plan. It will allow you to identify what needs to be changed in your lifestyle so you can meet your goals.
- Download a financial app. This is also something that will make monitoring your finances easier. According to Bankrate, 22% of Millennials say they use a smartphone app to help them budget. It can be very useful since you can bring this app with you anywhere – since you bring your smartphone with you everywhere. You can quickly access your budget if you have to.
- Create financial goals. Finally, you should also start creating financial goals. This will help give your financial life some direction. A goal can influence all your decisions and will guide you towards the life that you dreamed of. When you have your eye on the prize, you get the motivation to overcome all the hurdles that will be thrown your way. Monitoring these goals will also help you see the progress that you have done over time. It is will make you feel fulfilled and encourage you to pursue other goals to improve your life even further.
As you can see your financial life is completely under your control – as long as you learn how to monitor the right areas regularly. Although there are external factors that can influence your finances, it is up to you how you can adapt or make a change to keep your finances continuously improving.