Essential Financial Tasks

Most of us have no problem spending money. Sometimes, spending can get a little out of hand, especially during the holidays.

Keeping track of your spending and sticking to a budget doesn’t have to be arduous. Just be sure to perform these 3 essential financial tasks. They’ll help you avoid the mini-financial catastrophe that can be triggered by losing track and help keep your financial house in good order.

Reconcile Key Accounts

It’s easy to do your bank, savings and loan, or other financial institution a favor and accidentally spend more money than you have in your account. They’ll love you even more if you pay late. These miscues can result in late fees, interest charges, and other monetary penalties. Personally, the fact that these “junk fees” make up a good portion of my financial institution’s profit margin makes me angry enough to never let that happen again.

Sign up for electronic access and make sure you’ve selected electronic delivery of your account statements. This gives you access to these key statements much sooner than mail delivery. If you’ve got multiple accounts, think about consolidation to make things less complicated.

It’s important to not only reconcile these key accounts every month but do it as soon as these statements become available, or at the very latest, a day or two after. By key accounts I mean the ones where most of your transactions happen, which for most folks are checking/debit card and credit card account(s).

Reconciliation simply means making sure their numbers add up to your numbers. Apps can simplify the reconciliation process by automating it somewhat, but you still need to track down errant expenses and deposits if things don’t add up.

Credit card accounts are important to reconcile as soon as possible too. This is true even though credit card statements are generally available a good 3 weeks prior to the statement due date. Don’t procrastinate. That way you’ll have plenty of time to get together the money needed to pay off the balance owed in full.

Timely reconciliation of these key accounts is also your first line of defense against identity theft. By discovering a problem sooner rather than later, you’ll help minimize any damage. Make reconciling your key statements as soon as they are available a monthly habit!

Schedule Payments

Hold onto your money as long as you can by paying your bills on the due dates. Extra money in your account has utility even if you’re not earning interest on it: It helps with cash flow when managing a tight budget. That’s why I’m a big fan of scheduling payments to be paid on their due dates.

Financial institutions, however, would rather have you post the date you’re paying the bill as the payment date rather than some distant due date. Just as you want to hang onto your money longer, they want it right away. That’s why when scheduling payments, the day you’re paying the bill always is the default payment date. You’ll need to manually change the payment date to the due date.

If you’re still working on getting out of credit card debt, do not follow this advice. When paying down a carried balance, credit card payments should be made as soon as money becomes available, regardless of the due date. You can dramatically cut down the time and money it takes to get out of credit card debt by making early payments on a carried balance.

I recommend you don’t give a creditor (mortgage company, auto loan, student loan, credit card company) or vendor (electric company, other utilities, phone, media subscriptions) direct access to your checking/debit card account. That’s what you’re doing when you sign up for automatic payment. It gives them the upper hand in case of a dispute.

If you want the convenience of automatic payment, do it on a credit card instead of your checking account. Since you haven’t technically paid that vendor or creditor until you pay your credit card bill, you’re in the driver’s seat if there is a problem. I’ve found credit card companies surprisingly cooperative when disputing charges.

Know Your Income and Expenses

Estimate your income for the remainder of the year and next year. This can be relatively easy, or harder depending on your income sources and how you’re paid.

401k contribution limits and IRA contribution limits are higher next year than they are this year. Be sure and adjust your contribution percentages accordingly.

Review this year’s expenses and try and make projections for next year’s expenses too. Come up with a method of tracking how you spend your money if you don’t already have one. It doesn’t matter how you do it, just make sure to account for all the ways you spend money, including debit transactions, credit card charges, cash outlays, checks if you still write them, and anything else.

What does your expense tracking device look like? It could be cloud-based with account aggregation and an app for your phone, standalone accounting software, or a customized spreadsheet. Maybe you’re a receipt saver, or you like keeping track with paper and pencil.

Technology can help some with this boring, mundane task. Apps offer cloud storage, automatic updates, reconciliation tools, and smartphone alerts. Still, if you’re doing it correctly there will always be a bit of grunt work associated with your tracking, so it’s important to find one that suits you and is easy to use.

If you’re not tracking your expenses, you’re overspending, it’s just human nature. Even if you’re made of money, you still need to track your expenses and put what is hopefully a larger chunk of change towards your financial goals. Always try and prioritize saving over spending.

Put it on Autopilot

Once these essential financial tasks are scheduled and in place, you can rest easy. Money going out never exceeds the money coming in, bills are paid on their due dates, and identity theft and any mistakes made are caught before they can become a problem.

[Best Money Newsletter originally published 2023 1127 on the Beaver Moon.]