My Daily Money Habits
I strongly believe that small and simple daily habits, when done consistently, can lead to great things. Personal finance is no different.
Today I’d like to talk about 4 simple things I try to do every day to accelerate my progress on the path to FI.
1. Review Recent Financial Transactions
Average time per day: 5 minutes
Step 3 of my 12 recommended steps to achieve financial independence is to track your income and expenses. When it comes to my own personal finances, I practice what I preach.
Every day I try to review what has happened in all of our financial accounts. Between our checking account, various high interest savings accounts, credit card accounts, retirement accounts, and other investment accounts, there are more than 30 accounts to keep track of. It would obviously take a ridiculous amount of time to log in to each account individually and review the recent activity. That is where Personal Capital comes in.
I love Personal Capital. If you are unfamiliar with it, you can check out my review of it here. I use Personal Capital as a one stop shop to keep track of all of our up to the minute financial data. After opening up the app it takes about a minute to sync all of our financial accounts. Once that is complete, I can easily review all of our recent financial activity.
Why do I review all of our recent transactions? Well, here are at least a few reasons:
First, it helps me know what is going on all the time, keeping my finger on our financial pulse so to speak. I like to know how much money is coming in and how much is going out. Are my paychecks what I would expect with the proper amount of contributions to retirement accounts and taxes withheld? How much money are we making in interest and dividends? When you see your investments making money for you each and every day, even when you sleep, it is strong positive reinforcement to continue investing your money and being financially responsible. What are we consistently spending money on? Are their subscriptions we aren’t using or no longer need? Are we going out to eat too much or spending too much money on clothing? When you track everything very closely you start to develop a feel, a sixth sense so to speak, of when you are starting to spend more in an area than you should.
Second, when I review each of our expenses, I assign a category to it in Personal Capital. If done consistently, this provides the framework to look at expense categories over longer periods of time. For example, I can easily go back and see how much we spent on gas for our vehicles over the last six months. Or I can see how much we spent on going out to eat over the last year. This can be a very powerful tool when analyzing your own financial behaviors. If you do this every day consistently, it is pretty easy to do. But if you get behind for a couple of weeks or a month it can be pretty overwhelming. So my advice is take a few minutes to do it every day.
Finally, regularly reviewing all of the activity in your financial accounts protects you from mistakes and fraudulent activity. I have had both happen to me within the last couple of years.
A few months ago, my paycheck was less than it should have been. I looked into things and found out that I had mistakenly been charged for extra vacation that I had never even taken. It was an honest mistake and everything was resolved, but if I hadn’t been on top of things, I would likely have never gotten that money back. Remember, no one cares about your money more than you do.
Another time I was reviewing our credit card activity and I found charges for thousands of dollars in Yankees baseball tickets. Anyone that knows me knows I love baseball, but I certainly wouldn’t spend thousands of dollars to go see the Yankees (Go Sox!). I called the credit card company, claimed the charges as fraudulent, and cancelled the card. I am glad I caught it right away before things had gotten worse.
2. Review Upcoming Expenses
Average time per day: 5 minutes
Every day I also like to review our upcoming expenses to make sure I am not missing anything and funds are in place to cover those expenses.
How do I do this? I use a simple app that is basically an electronic version of an old fashioned checkbook. I learned how to balance a checkbook many years ago, a skill that is unfortunately being lost on younger generations. The app I currently use is no long supported so I can’t recommend it, but there are many current apps that do the same things. Why don’t I switch? I’ve been using this app for more than a decade and it works for me, so no reason for me personally to change.
The two most useful features of this app (and what you should look for if you want to download something similar) are that I can schedule recurring income and expenses, and I can schedule one time future income or expenses. Using this feature, I can enter in upcoming paychecks that go into our checking account via direct deposit every 2 weeks and simply set it to always recur. I can also enter in recurring known expenses such as tithes to our church, money that is automatically deposited into our savings and investment accounts, our mortgage payment, utility payments, insurance payments etc. I can also schedule one time anticipated income or expenses such as our expected tax return or a 6 month premium on auto insurance.
This is actually how we budget our money as well. I have been studying our spending habits long enough that I know on average how much we spend on non-fixed expenses such as groceries, clothing, going out to eat, entertainment, kids activities, etc. Since I know the average total of these expenses each month, I make sure that there is enough in our checking account to cover that amount. We put these expenses on a credit card that earns rewards and then I pay the balance off in full every two weeks when my paycheck comes. Sometimes we are a little under and sometimes we are a little over this preset amount, but I make sure we always have a cushion in our checking account to cover for this. As I mentioned in Step 6, Establish an Emergency Fund, we have a high yield checking account that pays 2% interest on a balance up to $10,000, so keeping this balance in our checking account serves as both the cushion for any slight increases in our spending AND as part of our emergency fund, all the while earning a pretty good interest rate for a cash account.
This system allows us to budget our expenses without actually having to budget our expenses. After years of tight and strict budgeting during medical school and residency, this system gives us a little more freedom without being as restrictive. As long as our non-fixed expenses fall within the range that we have agreed upon for the lifestyle we want to live, we don’t have to worry about how much we spend every minute of every day. If the 2 week balance on our credit card starts to creep up, then we talk about what we need to do to keep our expenses in check. And for any larger expenses, such as a vacation, we make the decision together and then I enter it in the app as a future expense, and then make plans accordingly to insure we can cover it when the time comes.
So each day I like to look at the current week, current month, and up to 3 months in advance to make sure all of our recurring and future expenses will be covered.
3. Review Our Financial Goals
Average time per day: <5 minutes
In Step 4 of my FI Step by Step series I recommended creating a financial plan. I also recommended that it be fluid and that you review it regularly. What good is a financial plan if you don’t review it regularly and follow it? I am true to my word on this too.
Every day I try to briefly review our financial goals. This includes those that are more short term, as well as those that are in the distant future. I believe that if you keep your eye on the prize, you are much more likely to succeed.
For my wife and I, shorter term goals include paying off my student loans (less than a month away!!!), beefing up our emergency fund, and saving money for real estate investing. Mid range goals include paying for our kids’ college educations and purchasing a new vehicle with cash when one of our current vehicles need to be replaced. Longer term goals include financial independence and funding our retirement.
Some days I spend longer on this than others, but the point is to review goals consistently to make sure you are always moving in the right direction and maintain focus.
4. Continuing Financial Education
Average time per day: 1-2 hours
I tend to believe that there is nothing I can’t do if I just put in the necessary effort to learn about it. Maybe that’s me being naive or arrogant, but it’s just the way I think. I am deeply committed to learning all I can about building wealth and becoming financially independent. Not because I want to be rich. But because I want the freedom in my life that comes with financial independence. That is why I try to dedicate 1-2 hours per day on average to learn things that will accelerate my progress towards FI.
I’m sure many of you would ask the same question. How in the world am I able find 1-2 hours per day to dedicate to learning about personal finance, investing, and real estate? The answer is simple. Over the years I have learned to take advantage of the time that I would otherwise be wasting, and fill it with something productive.
This may be a bit of a tangent, but I’ve often asked myself what separates those that are successful from those that are not? After all, we all have the same 24 hours in a day. Why are some people able to get so much out of life and some people are barely scraping by? At its most basic level, I believe the manner in which we use those 24 hours is what determines how successful we become. Those that have learned to maximize their efforts and optimize their efficiency can do more in a day than it would take many to do in a week or a month. With that in mind, I am always looking to maximize my time, which is our most precious and finite resource.
Audiobooks and podcasts are my general go to. Why? Because I can fill in that otherwise wasted time by listening to them. Here is how I fit it into an average day:
- 10 min in the morning as I get dressed to workout
- 15 min after I workout and get dressed for the day
- 20 min of drive time on the way to work
- 20 min of drive time on the way home from work
That alone is more than an hour a day right there. If I am driving to run errands, mowing the lawn, or doing other jobs around the house I can listen to even more.
Another way I try to learn things is by reading quick blog posts or articles on personal finance or investing. I have subscriptions to my favorite blogs so I get them by email (and you should subscribe to my blog if you haven’t already!). If I have 5 minutes to burn or if I’m standing in line at the grocery store, rather than waste time browsing social media, I’ll pull out my phone and read from one of these sources. During these short intervals of time I’ve also been using both the Zillow and LoopNet apps to quickly look at residential and commercial real estate listings to better understand the real estate market.
Finally, at the end of the day, I usually read from my Kindle at night as I fall asleep. Sometimes I read a fiction book because I enjoy it, but about half the time I’ll read about investing or real estate from a book that doesn’t have an audiobook option.
Even this blog is a way to learn. After all, how better to learn something than to try and teach it and share it with others.
The bottom line is that I have developed a habit to try to maximize my time by learning a little more every day.
Conclusion
With the exception of Sunday when I make an effort to focus more on spiritual things, these are the things I try to do every day to stay on top of our finances. The first three things only take me 10-15 minutes a day, but if done consistently over time can yield tremendous results. The fourth is obviously variable, but tends to be between 1-2 hours a day and is how I try to maximize my most precious resource, my time. Here are some take home points to consider:
- Small and simple things when done consistently can produce tremendous results.
- What are your daily money habits? What could you begin doing today that could accelerate your progress towards FI?
- Is there empty time during your daily routine you could use to learn more about personal finance, or any other area you may want to grow in?
Thanks for reading. I hope you are doing well in your progress towards reaching FI. If you have any questions or comments that might help other readers, please list them below. In the meantime, keeping working towards Freedom Through FI!
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