One of the best pieces of advice I have ever heard about getting a handle on your personal financial situation and charting a course for getting out of debt is a very simple suggestion: spend one hour with your money each week. What the heck does that mean? No, it doesn’t mean putting what little cash you may have on the coffee table to ponder it.
It simply means that, at least weekly, you should sit down and look at your current finances. How much money came in this week? What bills need to be paid, both right now and in the near future? Have you made sure to “pay yourself first” and make a deposit into your investment account?
These and many other questions can be answered by simply sitting down and looking at your current account balances, bills that must be made within the month, and a look at what is coming up in the next few months. Is an insurance payment due soon? Are you expecting a tax refund? How have your financial status changed since last month? Are you moving in the right direction?
Here is the weird thing, which could well be the most powerful reason for following this common sense advice. Psychological studies have shown that the process of self-observation, in this case simply taking the time each week to carefully consider personal financial information, may actually influence your behavior. Think about it. It certainly makes sense that if you are concerned enough about your finances that you take the time each week to look at how you’re doing, just making that commitment means that you will do a better job of watching your money and making smart financial decisions. As with everything else in this blog, it’s just common sense.
Other than spending an hour each week with your money, generally looking at a personal balance sheet (Assets – Liabilities = Net Worth) each month is not a very valuable exercise, since any real movement may be small. But over the course of a year, a personal financial statement will definitely show if you have made progress against your goals, so be sure to check it at least once or twice a year. Seeing positive progress is a powerful psychological motivator!