4 min read
Earlier this week I met up with a friend to talk about personal finance stuff and during our conversation she said something that caught my attention:
“I don’t want to have to think about my finances all the time and track every dollar I spend, I just want to live my life each day.”
Outside of the small group of us who are obsessed with personal finance and get an adrenaline rush from filling in spreadsheets, I think 95% of the population shares the sentiment of my friend.
For most people, personal finance is either intimidating, confusing, or just downright boring. It’s not something they want to spend a significant amount of time on each day.
And although I do love my collection of spreadsheets I update each month, I completely understand this feeling. After all, even those of us who love personal finance don’t live to optimize our finances, we optimize our finances to live better lives.
Even though I spend a great deal of time writing about personal finance, creating personal finance apps, and sharing my thoughts on money, I personally only spend about 30 minutes each month tracking my own finances.
The Beginning – Middle – End Approach
I have a simple approach of only checking and updating my finances three days per month.
On the first day of each month I update my net worth. This means I check my account balances in my savings account, checking account, retirement accounts, my brokerage account, and update my numbers in my net worth spreadsheet. This only takes 5 – 10 minutes.
On the 15th day of each month I check my credit card spending online and pay off the balance. This is a simple way to make sure I wasn’t charged double for any of my purchases and that all the purchases were made by me. I don’t have to pay off the balance until the end of the month, but I pay whatever balance I have anyway just because it makes me feel better. This takes about 5 minutes.
On the last day of each month I update my monthly income and expenses.
I update my income by looking at what dividends I received in my brokerage account, what paychecks were deposited in my checking account, and what blog income was deposited in my PayPal account.
I update my expenses by going online and downloading all my credit card transactions for the month. I add up my expenses and visualize them in Microsoft Excel. This whole process takes about 10 – 15 minutes.
You could use a software like Mint to track all your income and expenses for you, which would make this process even faster. Part of the reason I manually update my numbers is because I just enjoy the process of doing it (don’t judge).
In total, it takes me 30 minutes or less to check and update my numbers during these three days each month.
Personal Rules of Thumb
The reason I only spend 30 minutes each month tracking my finances is because I have rules of thumb that greatly simplify my financial decision-making and tracking process.
Rule of Thumb #1: No Budget
I have nothing against budgets. For some people they work wonderfully. But I have never used one and instead I use a simple rule of thumb: when I add up my expenses on the last day of each month, I make sure I didn’t go crazy in any category and that my total expenses were similar to previous months.
I’m a naturally frugal person. I cook most of my meals, rarely buy new clothes or tech gadgets, and I don’t need much stuff to be perfectly happy. I personally don’t need a budget to ensure my spending remains low.
Rule of Thumb #2: Simple Money Rules
I have three income streams and simple rules for each stream to ensure my money is flowing into the right places at all times.
I have $650 deducted from each of my two-week paychecks and automatically invested in my 401(k). The remaining amount gets dumped into my checking account.
When my checking account exceeds $1,000 I transfer the excess to my savings account.
When my savings account exceeds $6,000-ish I invest in index funds in my brokerage account.
When I receive dividends from individual stocks, REIT’s, and index funds I automatically have them reinvested. I don’t even see the dividends hit my bank account.
When I earn money through advertising, affiliate links, and promoted posts on my blog it all gets dumped into my PayPal account. At the end of each month when I total up my monthly income I simply transfer any money in my PayPal to my savings account.
Rule of Thumb #3: Long-Term Thinking
When I invest in anything I plan on holding it for several decades, if not forever. I’m investing for the long haul. Whether the market is roaring or crashing, I don’t stress about prices. I know that my investments will likely increase in value over the years and continue to pay me higher dividends as time goes on, so I just sit back and let the investments do the work. I spend very little time obsessing over stock prices each month.
The Background Machine
My finances are like a machine that’s always running in the background of my life. With every dollar I save and investment I make, the machine grows stronger and works even harder to grow my money. But I don’t actually want to check up on the condition of the machine constantly, I just want simple rules in place that keep it running smoothly.
The whole point of personal finance is to optimize your money so you can live your best life without stressing about how to pay for it. By creating your own financial rules of thumb and maintaining a long-term mindset, you can create a money machine that runs in the background of your life without constantly needing to watch over it.
Zach is the author behind Four Pillar Freedom, a blog that teaches you how to build wealth and gain freedom in life.
Zach's favorite free financial tool he's been using since 2015 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments and ensure that he's on the fast track to financial freedom.
Although the bulk of his net worth is invested in index funds, his favorite place to invest in individual stocks is M1 Finance, a site that allows you to build a custom portfolio of stocks for free.
His favorite way to save money each month on his recurring bills is by using Trim, a free financial app that negotiates lower cable, internet, and phone bills with any provider on your behalf.
His favorite micro-investing app is Acorns, a free financial app that takes just 5 minutes to set up and allows you to invest your spare change in a diversified portfolio.
His favorite place to find new personal finance articles to read is Collecting Wisdom, a site that collects the best personal finance articles floating around the web on a daily basis.
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Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.