You brush your teeth every day, right?
And you eat every day, and even if you have a treat, you try to eat something healthy every day, right?
It’s the same thing with financial planning . You need to do it every day for it to work.
Now, we’re not saying that you need to sit down and sift through all of your financial records every day, but you probably do something to earn or spend money just about every day. There are lots of great tools out there to help you track all that income and all that money going out, but even if those tools work automatically, they won’t be doing any good if they just work automatically in the background and you don’t do anything to monitor them.
Even the automatic tools aren’t perfect. If you use an online system that takes the spending from your credit card, you may spend money on something related to health care. But if the name of the place isn’t clear to you, or to your tracking service, then you may think that it’s just a restaurant or something else.
You won’t remember if it’s a few months later that you are trying to figure it out, but if you check on that every day, or at least every week, then you can be sure that everything gets classified the right way.
And for your income, it’s good to keep on top of that, too.
In the past people just had a job, and their pay never changed much and the deductions didn’t change much, etc. For those people, well, the financial life is pretty easy, paying taxes is much easier, and there just isn’t as much to keep track of.
The thing is, though, there are fewer and fewer people who fit into that category. More and more people work maybe one part-time job and the rest of the work is contract or on spec or whatever. It’s crucial to keep on top of all that money coming in very carefully so that you know you are getting all the money that is owed to you.
Once you get in those good habits of keeping track of all the money coming and going, you will be in a much better position to do some financial planning that means something. You can predict how much money you’ll be spending because you’ll know exactly how much money you have been spending. As they say, past performance is not always predictive of future performance, but if you know what the past has been for yourself you will be in a much better spot to predict your own spending in the future.
And that is at the heart of the best financial planning: making sure that you have the resources to cover your expenses for many many years to come.