4 R’s – Reconcile, Redeem, Reinvest, REPEAT!
How will you project your financial future if you don’t learn from your past? We all make financial mistakes; the key is to learn from them so we don’t continue to make the same mistakes. One way is detection – and that comes thru reconciling.
A few years back, I wasted almost $100 in magazine subscriptions. I thought I would read and learn more if a physical magazine came to my house and it would force me to read it.
After a few issues, I would just flip through it like it was a chore, smell some of the free colognes and then leave it on the table – well I used some pages to make paper airplanes and boats for my son too. The point is I didn’t realize it was a waste until I went to reconcile my credit card statement and actually had to pay for the subscriptions!
Reconcile – Choose Whatever System You Like
For me, it’s a spreadsheet that I created myself many many years ago (SMM’s Free Excel Budget Template). I don’t even remember why I decided to format it this way, but it works for me because it captures the income and expense categories I normally have in my life and reconciles to my bank account(s).
This is reconciling and I have another tab within my own workbook which is a budget (although the budget is really in my head too) since I reconcile so often and know about how much expense should be incurred in a particular category each month. For example, my cell phone bill is about $155 (still got that unlimited data plan – YES). If it goes to $165, guess what, I’m going online to my account and finding out what happened.
Redeem Your Points
Recently I redeemed points from my Chase credit card, which I use for shopping and dining for a credit of $70.74 that was posted to my account. So I felt like Chase rewarded me and I could go to dinner a couple of times for free. Now – about a month later I have exhausted the funds on this credit so I am happy I redeemed it.
The points were equivalent to $56 in Amazon cash and I thought to myself why in the world would I want to redeem it for Amazon cash that is worth $14 less than the credit I would get into my account? Maybe there are people out there that fall for this, who knows?
Reinvest You Money
One of the best financial books I’ve ever read – actually I listened to the CD in my car, but that still counts was The Richest Man in Babylon (SMM’s Personal Finance Book Recommendation). It is very simple, yet powerful as it talks about the power of money and having it work for you to create wealth (highly recommend it of course). Most of us do reinvest by regularly contributing to our retirement plan. But I do know a couple of people who are not so regular.
One of my friends told me he changed jobs so didn’t get a chance to roll over his old 401k into his new job. But he changed his job a few months ago! I remember within the first week of changing my job completing my 401k rollover paperwork. This is very important, but it’s VERY VERY important if your employer contributes or matches to your plan too.
Repeat – i.e. – Make it a Habit
“The chains of habit are too weak to be felt until they are too strong to be broken.” ― Samuel Johnson. For me, I reconcile my accounts a couple times a month, redeem my points a couple times a year and reinvest excess funds probably on a quarterly basis give or take. To start out, it’s a good idea to set a reminder on your calendar if you have a smartphone or your email. Once you get the reminder, do not delete it until you have taken that action.
By repeating this process, you will establish efficiencies in, for example, where to redeem points, which accounts to reconcile first and how, where it is better to charge certain types of expenses. If you have a credit card that receives 5% on gas, why not use that credit card for gas purchases?
In terms of reinvesting, set an automatic transfer from your checking or savings into your money market account (even if it’s just $20 per month or less). Most likely, you can adjust the amount any time to transfer more or less. Then maybe on a quarterly or semi-annual basis, you can invest that excess into a stock/mutual or index fund.
How often do you reconcile, redeem, reinvest and repeat? Which of these are the most important for you? Please share your thoughts below.
Making a habit of reinvesting your money is absolutely key.
I try to be always prepared in terms of discovering investment opportunities so if money comes, I’ll invest immediately.
I’m sure you’ve heard the saying that failing to prepare is preparing to fail. It’s good to do research beforehand because when you do find an investment opportunity and you don’t have the funds in total, it gives extra motivation to save more to achieve your deployment goal.
I feel like I am constantly tinkering with my reconcile system. I am an optimizer by nature. So I like seeing what systems are out there and how I can do better. So it’s really fun playing around with the tools to see how I am doing with my budget and see what recommendations various programs say I can do to optimize it even further 🙂
Me too! I have an account with Personal Capital (love the net worth screen) and it’s saying that I may be paying high fees in my 401k plan. But I already know that because it’s a targeted date fund that reallocates investments as you near retirement age, so I’m not sure if it is worth it for me to reallocate such a large part of my savings towards my retirement myself. The thought makes me very nervous.
I’m loving these R’s. I’m not a terribly frugal person, but I’ve found that habits make so many financial things almost effortless. I always reconcile my accounts on Wednesdays and since it’s just a part of my routine I hardly have to think about it (how’s that for knocking out two R’s at once?).
Ugh-the amazon redemption from Chase now. I did it once right after they changed the policy from getting the full reward to the 80%(something like that?) and was so mad that I hadn’t noticed it. So silly that they did this.
I do mine on Fridays just out of habit and I guess it makes me feel like more accomplished going into the weekend, lol. Yes you gotta be careful and read what you’re actually getting from some of these reward programs. I usually just account credit because what they offer in terms of products I most likely won’t use anyway.
I think these are such simple and obvious steps for people to take, yet they are somehow overlooked. As you posed your question, you kind of make the point that everyone has something different that works for them (maybe people redeem more often, reconcile less often, etc.) but it is important to be doing these things.
My husband and I reconcile monthly in excel (but do informal checks multiple times a month).
I used to redeem my points once a year at Christmas time, but now with everything joint, we are saving our points towards a big vacation in 2018 and we’ll see what the future holds.
Reinvesting is down in multiple ways. We have our dividends reinvested in our investments and I have rolled over my 401ks with every job I’ve had or at least reinvested into a separate IRA on my own when not allowed.
Wow, you are covering everything, nice work! I use excel too because it is so flexible and I can insert notes and comments. Sometimes expenses are so on off and unique I won’t even remember the next time I look at my excel sheet, which could even be a couple days later, lol.
Everything in the personal finance and improvement world has a piece about continuous improvement, the repeat in your list. You not going to make it perfect the first way through and there will always be opportunity to improve.
So true! I’ve learned so many ways to improve my own personal finance situation by just reading on other websites and bouncing ideas from here and there. When I make a lot of changes to my budgeting sheet I save a new version though just in case I need to go back and see if something needs to be changed back :-).