Making money is one thing. Using that money wisely is another. Maximizing financial opportunities and avoiding costly spending mistakes takes knowledge, responsibility, and discipline.
However, smart money management doesn’t happen overnight. Many people have to learn on their own. Unfortunately, one of the most critical aspects of financial responsibility is something most folks overlook: tracking your finances.
The good news is that keeping track of finances isn’t difficult. The following are six steps to follow in order to track your finances going forward:
The first step is to become familiar with key terms, phrases, and concepts related to personal finance. From understanding different types of credit to learning about compound interest, detailed knowledge of these and other important topics will help you better understand aspects of your financial situation. Would you board a plane with a pilot who doesn’t know the difference between an elevator and an aileron? No, so why would you trust your finances to someone who doesn’t know the difference between a secured credit card and an unsecured line of credit? With this in mind, take time to learn everything you can about personal finance.
Keeping track of finances starts with income. You should have a precise understanding of how much money you bring in each month, down to the amount you receive with each paycheck. Download your bank or credit union’s app to have quick access to your account. That way, you can always check on how much money you’re bringing in as well as what you’re spending.
Monthly expenses are an unavoidable fact of life. However, it’s important to have a detailed comprehension of how much money you’re spending each month on things like rent, utilities, and groceries. Given the wide range of purchases over the course of a single month, expenses will probably be the hardest thing to keep track of over time. However, they’re also the most important factor in monitoring your finances. Failure to accurately track spending often leads to costly overdraft fees, canceled accounts, and other bad news.
The third key component to tracking your finances is monitoring debt. In addition to keeping track of the amounts owed across all accounts, you also want to know the interest rates attached to each sum. Doing so enables you to identify which debts are a priority in terms of repayment. Generally speaking, the higher the interest rate, the faster you want to pay the debt off. Doing so saves money in the long run.
Contribute to Savings
Lastly, any savings you accumulate should be routinely monitored to ensure the best return on investment. While the typical savings account doesn’t generate much in terms of interest over time, certificates of deposit and low-risk investment opportunities are an easy way to put your savings to work. Regardless of the way in which you manage your savings, monitoring the balance once or twice a month will ensure your contributions are at the level required to outpace inflation and maximize potential opportunities.
Use an App
Now that we’ve outlined the key aspects of keeping track of your finances, it’s time to discuss how to safely and securely monitor them over time. The best option is to use one of several highly-rated apps designed to help users monitor income, spending, savings, and debt. These apps often require minimal signup in exchange for alerts and reminders regarding updates and changes to your financial situation. For instance, you’ll get an alert if your available balance dips below a certain point. You’ll receive a ping when a scheduled payment is about to get processed. If you desire your financial tracking to run on autopilot, then using budgeting apps and similar software is the way to go.
It’s often said that making money is easy; keeping it is the hard part. The key to doing so is taking the time to track your finances as much as possible. From income to expenses to debt and savings, monitoring your finances gives you the best avenue available for making the most of your hard-earned money.
Julie Steinbeck is a freelance writer from Florida. She enjoys covering topics related to business, finance, and travel.