Broker Check

The B Word

September 23, 2022
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The other day, listening to the radio on my way to work, I heard a morning radio host ask a trivia question that piqued my interest:

This used to be a monthly thing for almost all adults. Now, a poll says only 21% of Americans will do this.’ What is this?

Now I am sure that you, like me, have lots of possible answers bopping around your head. Maybe reading a newspaper or going to the library to check out a book. How about owning a landline telephone. But remember, this is a wealth management blog! Any thoughts?

I wasn’t shocked when the host revealed the answer: balance a checkbook!

Basically, almost 80% of society no longer balances a checkbook, and I would venture to say it’s no longer taught in schools.

So, why do I even bring this up? If nearly 80% of Americans live life today without using a checkbook, it may make sense that we’ve moved beyond this habit. However, I would argue it is important to understand the goal behind this action.

The original purpose of balancing a checkbook was to reconcile accounts. What are my receipts, what did I spend and what, if anything, is left over. Equally important, does this reporting match that of my bank statement. However, along the way the checkbook became a black and white ledger of, and allowed insight into, our spending habits. So, although most Americans no longer write checks, as part of this transition we’ve lost an accounting that can prove to be crucial for most Americans. How do you know where your dollars go each month if you do not track it? Today, we also find significant reliance on credit cards as a form of currency exchange. And while I am a firm believer in technological advancements and ease of transaction, a symptom of this change is blurred vision into spending habits.

However monotonous, budget tracking gives insight into our financial health. Perhaps it can even become a physical representation of the emotions we carry about our own spending habits. Let’s face it, money isn’t just dollars and cents. In our life, money holds a myriad of other meanings from status to aptitude. But that’s a topic for another day.

I have said it before and I will say it again, budgeting is not innate. No one is born knowing how to budget for all life can throw at us, including our goals. What makes it more difficult is that each month we face the task of finding balance. How do I save for my future goals, but also live for today and enjoy the hard work I put into earning a living? It’s difficult and like anything in life, it takes practice.

So, for what it’s worth, here are a couple budgeting tips and tricks.

  1. Write down everything you spend. Be consistent. Do this over time to get a gauge of average monthly spending. Most people do not realize where their money goes each month. How can you determine how much you can allocate elsewhere, without knowing where the money goes in the first place? This can be done in any form. Today, many companies offer platforms to make budget tracking simpler. An excel spreadsheet will do the trick. And if all else fails, there is always the crowd favorite: a yellow legal pad.
  2. Once you know where your money is going, find areas where spending may be inflated. Beth did this exercise at the beginning of her career and found that she was spending too much of her monthly budget eating out. For Beth, eating out become a habit of convenience rather than enjoyment. This process allows you to identify areas where you can reallocate dollars toward other goals.
  3. Once you have an idea of how much you can reallocate, set up systematic savings. The helps to build habits and consistency.
  4. Take baby steps. Start small. When you get raises or bonuses, increase savings first. But don’t forget that you’ve worked hard. Celebrate these victories.
  5. Recognize that only you can prioritize how your money is spent. Make room for the things that matter, the things that fulfill you.
  6. Remember things may not always go to plan. There will be unexpected bills that come up. It’s okay. We are all human and life happens.
  7. Finally, seek accountability. Not everything needs to be done alone. Find individuals who are reliable and help you remain accountable to your stated goals. Remember we are here to help too. Call us.