I’ve learned to become meticulous with my finances.
I once racked up an insane amount of debt. To repay that debt, I relied entirely on budgeting. And when I began budgeting, it quickly became an obsession.
My financial behavior swung from highly irresponsible to overly diligent. But I knew it wasn’t a phase or a fad. Budgeting became the only way I could manage my money and make sound financial decisions.
In fact, looking back now, it’s hard to understand the information I used to make previous financial decisions. My prior financial choices were unfounded and random - more reactionary than proactive.
As I began budgeting and repaying debt, I was consumed with reading, watching, and talking all things personal finance; it was the only topic consuming my mind. Because of my hyperfocus, I wasn’t much fun to be around.
Here are just a few of the financial habits I’ve developed to repay debt and grow wealth.
I Reconcile Every Bank Account
There’s a reason I chose the domain name ReconcileYourWallet.com - I genuinely reconcile all of my accounts regularly, including my wallet.
Reconciliation, if you’re unfamiliar, is the process of using two sets of records to ensure figures are correct.
Think of using your credit cards to buy groceries. You leave the store with a receipt which should then correspond to the amount that’s processed through your credit card.
Or, think of paying at a restaurant where you write in a tip. Do you check to ensure that the correct amount is processed by the restaurant?
Reconciliation helps me ensure that what I spend is the same amount processed through the bank; it helps me to see charges that aren’t mine; and most importantly, it keeps my eyes on the amounts I spend.
Recently, reconciliation was on my side, as I logged into my online banking and saw transactions that weren’t mine. Upon reviewing my credit card transactions, I saw three gas station transactions from the same day - totaling $375.
Thankfully, my bank quickly rectified the error.
It’s crucial to keep your eyes on your banking statements or online banking ledger to watch for errors processed through your bank accounts.
I Double Check Every Bill, Invoice, and Receipt for Accuracy
I think most people look at a restaurant bill after a meal, but have you ever taken note of whether the price advertised in the menu is the price listed on your bill? Or, if the price advertised in a store is what you pay at the register?
I make a habit of doing this.
Last year, my mom and I visited a west coast resort. We planned to stay two nights as we were working our way through a road trip, moving from place to place every couple of days.
This resort, in particular, was the highest cost of all our selected accommodations. We justified the decision to stay as our previous accommodations were low-cost, so it balanced out our total budget.
Nonetheless, we spent two of the evenings having a glass of wine and a few snacks in the hotel lounge. On the first night, upon receiving the bill, the wine on the check was priced higher than what was advertised on the menu. We pointed out the error to the server, who promptly made the correction.
I would assume that the update would be made in the computer so that, upon dining there the following night, we wouldn’t have the same experience.
But I was wrong. Upon checking our bill the following night, we were again overcharged.
Taking the time to review invoices, bills and receipts can save you dearly over time. Next time you buy something, take the time to ensure the price charged matches the advertised price.
When Given with the Choice, I Pay Monthly Expenses Annually
When repaying my debt, I started to dig deep to find every way I could to save extra money.
My car insurance at that time was paid annually, and I got to thinking that the insurance provider likely didn’t offer me monthly payment options for free. I sat down and compared paying the annual cost upfront (in advance of the year) versus making the payments monthly. There was a $50 difference.
$50 wasn’t a huge amount, but I realized the significance when I gave thought to all the other expenses I was paying monthly rather than annually.
So, I reviewed all the expenses I paid monthly and investigated whether I had the option to pay annually, and then I set a plan to flip the payment on its head.
While making payments monthly, I would tuck a second payment (for the same amount) in a savings account. That way, upon renewal, I would have the annual payment saved in full - reversing the payment cycle.
The expenses I now pay annually include DropBox, Microsoft Subscriptions, Car Insurance, House Insurance, etc. In all cases, an annual payment results in a lower cost. For each expense, I save a monthly amount myself, so I can pay the annual cost in full when the payment is due.
If you can manage, try and pay monthly expenses annually instead. You’ll be surprised at how much you’ll save.
I Track Every Cent of My Cash Spending
On occasion, I coach individuals and couples on their finances. In some cases, we strategize on debt repayment, in other cases, we work through budgeting.
In almost all cases though, clients put exceptional attention on the spending details provided through their debit and credit cards while ignoring their cash spending.
Cash is tricky. After all, once it leaves your hands, there’s no way to track it. In contrast, the bank won’t let you forget where you’ve used your debit or credit cards.
Let’s imagine you're a frequent Starbucks customer. You pop by on your way to work most days, and occasionally on the weekends too. Sometimes you use cash and other times you used your credit card. Let’s also imagine; you’re working with a budget - striving to reach your financial goals.
If I asked you if you stayed within or below your coffee budget (assuming you had a category so specific), what would you say?
You see, cash leaves part of the spending picture blank. Ignoring cash is just like ignoring spending from a bank account. Because cash can fuel your budget, it’s important to find a way to track it.
And, cash isn’t just spending, in some cases, it’s income too. Both expenses and income are helpful to track.
As they say, the devil is in the details. If you’re looking to have the full picture of your spending habits and stay true to your budget - you’ll need to start tracking your cash.
I Keep Limited Funds in My Checking Account
I keep roughly $2,000 in my checking account at all times. As the balance dips due to bill payments, I top up the balance.
I want to keep any of my excess funds in a higher interest savings account. I never want an excess amount of free cash wasting away in a checking account paying little to no interest.
When it comes time to pay a credit card bill with a big balance, I transfer the required funds from my savings to my checking and make the bill payment.
Shovelling all the funds you can into a high-interest savings account is good practice. Of course, you need to ensure that you have enough in your checking account to cover pre-authorized bills, but anything more is wasted in a checking account which just doesn’t offer the same interest rate opportunity as that of a high-interest savings account.
The Bottom Line
Success is often correlated with small healthy habits repeated time and time again. While keeping a focus on big financial habits is important, paying attention to small habits will go a long way.
Explore your smaller financial habits and see if you can implement and sustain them over time. You’d be surprised at how quickly smart financial choices will begin to snowball into significant financial success.