10 Reasons Why You Should Pay Attention to Your Finances
Whether or not you find your finances, money and the economy fascinating, it is important that you afford your finances the same rapt attention you would your chosen hobby or favourite TV show. So you’ve heard this before? You know how important it is to pay attention to your finances and monitor your spending and saving? Well have you really understood the importance of paying close attention to your finances, or do you struggle to remember your savings balance, and do you know how much is outstanding on your credit card right now?
If you don’t then you need to start taking your finances seriously and these 10 reasons will motivate you to get back in control. Once you know what is happening with your finances you will not only be more organised, you’ll also be happier and more financially stable.
Reasons to pay attention to your finances:
1. No one else will, nor should they
Part of the responsibility of earning your own money is managing that money and everything that goes with it. While many people seek the help and advice of financial planners and accountants, at the end of the day you should be the one making informed decisions and having complete control over your finances because it is the responsible, adult thing to do. Plus, no one knows your situation better than you do, no matter how much time you spend with your accountant, and no one knows your spending and savings habits better than you either because only when you are honest with yourself will you be able to identify why you can’t stick to a budget or a savings plan, and that’s not always something a financial advisor can tell you.
2. Someone else could be paying attention
While no one else should be managing your finances, there could be others who are paying very close attention to your accounts, your balances and your personal details as identity theft and fraud are not uncommon. The ease with which someone can skim your credit card details, take your bank statements from your letterbox or trick you into a fraudulent online login is frightening and is another reason you should be paying attention to your finances.
When you regularly monitor your accounts and balances you will notice right away if there has been a fraudulent transaction and if you report the transaction to your provider you can usually get the money back, or be well on the way to identifying and stopping a scammer. However, if you’re ignoring your credit card bills and leaving them unopened because you don’t want to know about the balance, then you will also miss if someone is stealing your identity.
Inflation is a good sign for a healthy economy, however, for your savings it can mean your balance is not as strong as you thought it was. Inflation is when the cost of just about everything goes up over time and this increase in the cost of living means than the savings you have set aside today, for a savings goal in five years time, will need to grow at a rate faster than the average 3% growth of inflation each year. Otherwise you can find your cash won’t stretch as far as you need it to in the future.
Therefore, if you regularly monitor your savings account balance, contributions and interest rate, you can make sure that your balance is growing at the required rate, and you can adjust your contributions or shop around for a better deal if you need to.
4. Check your statements
Again you may be ignoring your credit card balance or be depressed at how quickly your wages disappear from your transaction account, but that cannot be an excuse for not regularly checking all of your bank statements. While you’re looking for fraudulent transactions you should also check to see if you have been overcharged in a store, or if there are additional fees on your account which you have unfairly incurred.
You should also look out for bank errors because if someone transfers funds to your account by mistake for example, you want to make sure you notice that transfer before you spend the money and have to repay it. With regular monitoring of your bank statements you will also be aware of your account balances and this will help you avoid bouncing cheques or overdrawing your account and incurring more fees.
5. For your children
Your children will pick up their attitude towards and relationship with money from you, so you need to make sure you’re a good role model at all times. The first step to financial responsibility is knowledge and when you know what is going on with your finances, you can more easily educate your children and take the time to teach them banking terms, how to read a statement, how to protect their details online and how to spend and save wisely.
You will also be able to open a childrens’ savings account and help your kids manage their finances and learn to pay attention, just as you do.
6. If you’re in a relationship
Whether you’re married, have a partner or are living together, if you have joint finances with someone else you need to always pay attention. No matter how much you love or trust someone, everyone can get carried away with their spending at times, and whether you need to make sure they’re not going overboard, or you just need to know how much cash is available when you do the grocery shopping, you will benefit from paying attention to your relationship finances.
This can also help you and your partner make sure you are both on the same page and working towards the same goals because if one partner is having trouble sticking to the budget, it could be because they don’t believe in it.
7. You’ll know if you’re in budget
To create an accurate budget you will need to build a working budget which means not only entering your income and deducting your bills, mortgage and groceries, but also including every incidental expense so you can see exactly where every cent of your money is going. In this way you are not caught out by all of those little costs which can add up to mean you’ve run out of money before the end of the month – again.
In order to create a working budget you will need to pay attention to your finances either by collecting the receipts of everything you buy, or keeping a notebook of everything you spend. You can then update your expenses and spending in your budget and as you complete these updates you will be able to check and know how much you have left to spend, and whether you can afford to buy lunch next week or whether you should plan a few packed lunches.
8. Fees and interest can change
The fees and charges, as well as the interest rates can change on all of your financial product from your credit cards and transaction accounts to your home and personal loan. So that you know where your money is going and why, pay attention to all of your accounts and the fees and charges which are being applied.
Also look at how these charges are being applied because your transaction account for example may have fewer free transactions allowed in a month, and this could alert you that it’s time to shop around for a new account. Or your credit card interest rate may have gone up and you will need to know whether you can keep using the card for purchases or whether you should transfer the balance to a lower interest rate card.
9. You’ll be prepared for an emergency
Emergencies are often made worse because you’re not always sure how you’re going to pay for them. If your dog eats snail bait or your child has their teeth knocked out you don’t want to be wasting time checking account balances and clearing funds, you just want to get the best care right away.
That is why if you pay regular attention to your finances you will know at a moment’s notice how much you have in your emergency account and the status of your other account balances. You will also be able to instantly access all of your accounts without having to hunt down bank phone numbers of PINs which you haven’t taken the time to memorise.
10. Heightened consciousness
All of the attention you have been paying to your finances will be paid back to you in the form of financial responsibility. If you’re paying attention to your accounts, if you are aware of your balances and you understand how each product works then your financial situation is in the forefront of your mind each time you make a purchase and each time you go to spend. This means you are able to take the time to consider whether the purchase really is a necessity, or really warrants accessing the emergency account.
It is easy to ignore your credit card balance or your lack of a savings balance but that won’t help you pay down or build up those balances. What will help is being conscious of your situation, and making conscious decisions to change.
This is a guest post from Alban, who is a personal finance writer at Home Loan Finder, which offer information on reverse mortgages
Photo credit: Gnerk
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