Dating Your Money: 5 Reasons to Track Your Personal Finances

Properly tracking your income, expenditure and investment performance can provide transformative insights and opportunities on the journey to early financial independence.

Once a month I have a date with my money. And no, I’m not completely mad.

You see, dating my money has transformed the management of my personal finances in ways I never imagined.

But before I get to those benefits, let me explain how my money dates work.

The process is simple. Rain or shine, my money and I sit down eye to eye every month on a Saturday morning and a process of close romantic scrutiny begins in Microsoft Excel. I log on to my online banking and investments and I record new financial movements for that month under a few simple categories. For example, I’ll log my expenditure at supermarkets under ‘Groceries’, petrol costs under ‘Travel’, etc. Similarly, I’ll record my latest investment values.

Who said romance was dead, eh?

This process takes about 30 minutes in total, depending on how financially active I’ve been in a given month Whilst that may sound like too long a date with my money, I have come to see this routine as vital in my financial independence journey.

Indeed, whether you’re on a road to early financial independence or not, I’d recommend anyone serious about managing their personal finances for the better considers setting up something similar. It’s Personal Finance 101, but with a whole wave of potential benefits if you’re new to it.

Benefit #1: Seeing everything in one place

A holistic view of your live financial situation is an extremely powerful tool for decision making. Having all your financial data in one tracker allows you to have a complete picture of your latest financial circumstances. This means you will not only develop a better understanding of your overall net worth, but also of the interdependencies between the different buckets that make up your net worth.

This overarching view is particularly helpful on the route to financial independence in order to evaluate progress. A well-designed tracker is your go-to source. (Side note: I recommend incorporating a chart like this one.)

Benefit #2: Identifying trends and opportunities

The complete view of your personal finances that a tracker provides also gives a great overview for identifying new insights about your money. In an era of impulsivity, quantifying these trends and identifying waste and non-value added spend can create serious saving opportunities.

I track my expenditure, for example, in categories like Groceries, Entertainment, Utilities, Insurance, Car Maintenance and Fuel. While I’m not scrimping on food and drink, this type of approach immediately allows you to see the evolution in spend and investments and take decisions to capitalise on opportunities.

Some simple examples:

  • Assess how your fuel costs might evolve if you change job location.
  • Track your insurance premiums and go after cheaper renewals.
  • Track dividend income and rebalance your asset allocation.

Bottom line: A consolidated view of your personal finances presents a ranges of opportunities you may not have otherwise gone after.

#3: Early warning signal

As well as providing positive insights on where future savings and income opportunities may lie, a proper system for tracking your finances can also act as a mechanism to flag financial risks before they become more damaging than they need to be.

Take, as an example, promotional discount periods. Many regular expenses, like mobile phone contract costs, internet fees and banking fees, now offer introductory discounts for a fixed period, before the cost of those items than defaults to a standard higher rate. Having a tracker for monitoring these periodic costs allows you to quickly identify a spike in these costs and get in touch with the provider to negotiate a new deal or discount period.

#4: Diarising your saving habit

A permanent change in your approach to personal finance requires a mindset shift. By having a regular date with your money and properly tracking your finances, the routine and structure of repeating this exercise can begin to reinforce positive personal finance behaviours.

#5: Providing a source of inspiration

Quality tracking of your financials can also serve to reaffirm the success stories that you’ve already borne out in your personal finances. These might be areas that you hadn’t considered to be that significant over the longer term, but that positive historic trending have flagged otherwise. Such instances can provide the inspiration needed to double down and drive further progress.

Reflecting on sustained overall momentum in financial progress is also a useful source of inspiration when the going gets tough. My personal finance tracker, for example, has historical data going back several years and so reflecting on the growth over this time horizon provides me with continued motivation and inspiration for the longer-term journey to financial independence.

So what are you waiting for?

If you’re not already tracking your income and expenditure, I highly recommend doing so. You will in all likelihood be financially better off for it in the long run.

How often you go on a date with your money depends on your circumstances and what works for you. As a general rule I recommend updating and assessing things at least once a month. Less frequent than that and it will require a big administrative catch up – that or the level of detail just won’t be enough to get the most benefit.

Happy dating!

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