Watching the Money Pot

Like with organizing your finances, good cooking takes focus.For a long, long time I cooked by the smell of burnt. What does that mean exactly? It means I didn’t pay attention to what I was cooking until it was too late – I’d throw a pot roast in the oven and forget about it until I smelled smoke, I’d steam bunches of asparagus till the water was long gone and the bottom of the pot scorched black. Pancakes didn’t stand a chance in my kitchen. I was a business owner and the single mother of a young child: cooking was not my priority.

What does this have to do with organizing your finances? Plenty. Good cooking requires focus. Things turn out best when you pay attention – to the ingredients, the amount of heat, the order in which you assemble dishes, and how the food is coming along. The same principle applies to managing your finances. You’ve got to watch the money pot if you want things to turn out well. But many people only think about money once they already smell something burning – e.g. late fees on a credit card, an unexpected expense they are ill prepared for – and by that time, it’s too late.

Let’s talk turkey: How much time do you spend looking at your money flow? And is it enough? As a time management coach, finding time to pay attention to finances is a common request from my clients. The recipe is simple- create a reliable routine. Here’s how:

1. Carve out the time: Just as there are gourmet chefs who happily spend hours in the kitchen vs. those with a cache of 30 minute dinners, the amount of time you spend each week looking at your money flow can vary. I recommend dedicating at least 90 minutes to three hours each week. You could divide that into 10-15 minutes/day, or group it all into a weekly appointment with yourself.

2. Perform a routine checkup. Once you’ve carved out the time, here’s what to pay attention to stay on track, making incremental adjustments as needed (a pinch of salt here, some turmeric there):

  • Check your balances. Do a quick scan of the balances in each of your accounts: checking, savings, investments. The more intimately familiar you are with your assets, the more easily (and wisely) you’ll make decisions on spending and saving.
  • Monitor your bills. I am a huge proponent of automatic bill paying–it’s the equivalent of setting a timer to make sure you turn off asparagus when it’s al dente. Still, whether you pay by check or online, it’s essential to consistently look at what’s going out and when. What’s been paid? What regular payments are coming up soon? A quick gander will help you prepare for bigger ticket items on the horizon (e.g. property tax bills, home repairs, etc.).
  • Eyeball your budget and spending. There is tremendous value in regularly watching your expenses by category – especially the variable ones (e.g. car maintenance, entertainment, food, etc). Monitoring alerts you to areas where you might have gone overboard, or underboard, with plenty of time to compensate appropriately.
  • Move money around. Organizing your money into separate buckets prevents you from spending money you don’t really have, and provides a calming sense of security. At least once per week, move money to it’s proper account: from checking to savings, savings to retirement.
  • Strategize the future. Once per week, think about future goals for your money. Hankering for a trip to Europe? Dreaming of a business start-up that needs some seed money? Want to strengthen your retirement portfolio, or diversify your investments? Then take the necessary action (or call your financial planner for help) to move toward your goals.

There is one other thing food and money have in common. We need both to survive. Take comfort in the fact that just as with learning to cook a delicious meal, paying attention to your finances gets easier with practice. And the results are well worth the time. No more cooking by “burnt”.

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6 Responses to Watching the Money Pot

  1. Anonymous says:

    An excellent topic, and so appropriate – especially at a time in which you read media story after media story about how consumer groups and law makers are decrying overdraft fees or other bank fees as being unfair or burdensome, etc. Yet neither consumer groups, law makers, nor the media, it seems, wants to address the elephant in the refrigerator – namely, who’s ultimately responsible for managing one’s finances correctly so as to not experience financial problems in the first place. After all, if you incur overdraft fees or have a monthly fee levied against your account because you didn’t meet certain criteria for avoiding them, you really have no one to blame but your poor money management. Your simple recipe for managing finances should be required learning for all consumers.

  2. Helena Alkhas says:

    What a great recipe for managing finances – pun intended!
    As a Professional Organizer I experience first hand with my clients their anxiety when things are already spiraling out of control.
    Creating the time and making it a priority always pays off in the end with huge benefits both financially and emotionally as we all enjoy knowing we are being responsible and safe.

  3. LuAnne Dunn Done With Clutter says:

    Thanks for this fun article. Instead of imagining my computer or desk I could think about a meal while balancing my checkbook!

    Great help.
    LuAnne Dunn, Done With Clutter

  4. Julie Morgenstern says:

    Thanks for your insights Helena and LuAnn!

  5. Elinor says:

    Another advantage of control of your finances is that it helps manage your life. You find yourself applying the planning and checking skills to your home and happiness.
    One year, I went over all my expenditures, check and credit cards etc. and set up a 12 month budget. Not rigid as adjustments can be made easily from the haves and have nots. This has saved me many many $, time, and freedom of mind. Just came back from a wonderful weekend of Broadway shows and great restaurants paid for by rebalancing my 2012 budget. Nothing uncomfortable, just by buying travel arrangements earlier to get savings and going to a cheaper cell phone program. Try it.
    Elinor

    • Julie Morgenstern says:

      Hi Elinor,

      You’ve given us all a WONDERFUL example of the spending FREEDOM and peace of mind that comes from keeping an eye on your money.

      Thanks for sharing!

      Julie

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