My finances are largely automated. Most of my regular bills are paid automatically with a credit card, or through direct withdrawal from my checking account. This setup is convenient, and it means I don’t have to spend a lot of time trying to remember when to pay my bills. Even my retirement account and emergency fund contributions are automatically transferred each month.
However, it doesn’t mean that I should just leave my finances alone going forward just because I automate my finances. In fact, I make it a point to sit down and review my accounts at least once a month.
Even if you automate — perhaps especially if you automate — it’s important to occasionally connect with your money to ensure that you are on top of things.
It doesn’t mean that mistakes won’t be made just because computers are running things. In the past, there have been mistakes in the amount that has been charged to my credit card for bills. Paying attention to these possibilities is vital if you want to catch mistakes and avoid serious problems down the road.
One of the reasons I take the time to reconcile all of my bank and credit card accounts is so that I can thoroughly review my transactions each month. If something seems wrong, I can take steps to fix the problem. Without staying connected to where my money is going, there is no way to catch these issues before they turn into disasters.
Know Where Your Money is Going
When you automate your finances, it’s easy to lose track of what is happening with your money. You tend to think it’s all taken care of. While your bills might be paid on time, automation can lead to you not really knowing where your money is and what it is accomplishing. You can fall into a rut and let lifestyle inflation creep up on you.
Reviewing your finances every so often can help you re-evaluate where you stand right now. You can see if there are subscriptions you should cancel and other unnecessary purchases you are making on a regular basis. Don’t let the fact that your finances largely take care of themselves let you lose sight of your goals and allow your spending to drift into spending without purpose.
And make sure you plan ahead too. It’s easy to get stuck in the current moment if you automate and never really look ahead. Take time to review your financial plan so that you know where you should be going. Compare your goals and efforts to what is happening with your money. You might need to adjust your financial course in order to get back on track. A regular look at your finances and accounts can help you see where you should make improvements, where you can cut back, and how to plan ahead for a better future.
Automation can be a great thing for your finances. However, as with all tools, it can also cause problems. Don’t let automation keep you from developing a healthy relationship with your money.
And speaking of checking your finances, when was the last time you had a financial checkup?
One of the best things you can do for your finances is to periodically check your financial health. Doing so gives you a chance to evaluate your finances, recognize where you are in terms of financial health, and figure out where you want to go from here.
Areas of Consideration for a Financial Checkup
As you prepare for your financial checkup, you should consider the following financial areas, and make adjustments as necessary:
- Net worth: It’s not a bad idea to start with your net worth. Your net worth offers a snapshot of where your finances are right at this moment. As a result, it can make a good starting point. Look at your current net worth, and compare it to your net worth from your last checkup. This can give you a general idea of the direction you’re headed financially, and it can also warn you if you need to make some changes.
- Financial plan: Next, review your financial plan, and your overall financial goals. Are you on track? Is your financial plan still helping you reach your goals? Or have things changed enough that you need to make tweaks to your financial plan? If you’ve moved off course from your financial plan, now is a good time to get back on track. Recognize what you need to do to bring your spending and saving back in line with your long-term financial goals.
- Insurance coverage: Review your insurance policies. Look at the various coverages and plans that you have. It’s a good idea to consider what you need to protect your assets and ensure you have adequate coverage. In some cases, it might make sense to drop some of your coverage, or take steps, like raising the deductible, to lower your premiums.
- Investments: Consider your investment accounts. Does your asset allocation still make sense? Has your allocation drifted away from what you want? Review the fees you’re paying, as well. If you have investments that are racking up the fees for you, consider switching things up. In some cases, it might also make sense to consolidate your investment accounts.
- Spending and saving habits: Don’t forget to consider your spending and saving habits. Have you moved away from your savings goals? What about your spending? Have you stopped following your spending priorities? Re-establish your financial priorities, and make sure your spending is in line with them.
Now is also a good time to review your tax liability and look for ways to reduce your taxes before the end of the year. Part of your financial checkup should also include a look at the deductions and credits you might be able to squeeze in before the year ends — whether it’s buying business equipment or donating to charity.
An occasional look at your financial situation is a good idea. You can catch problems, or even just see where you might have become lazy with your finances. A financial checkup can help you identify areas for improvement, so that you can make a plan to boost your situation.
When’s the last time you gave yourself a financial checkup?