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.