It may sound counterintuitive, but it is easy to get too involved in your finances, especially after you have spent the time to automate and plan for your future. Most of us have fallen into this trap all too many times, because it is easy to get excited about the numbers and your goals. What starts as a quick glance at your finances could end up becoming hours spent creating 10 different spreadsheets with multiple scenarios for how your family’s finances are going to play out.
The problem with this obsession is that you could miss out on doing other things that are more rewarding than spreadsheets. From a financial independence point of view, you may not notice other cash flow producing opportunities.
Avoiding the Tweaks and Triggers
Perhaps one of the worst outcomes of this over analysis is the feeling that you should adjust your plan, making little tweaks along the way. However, these little tweaks are not worth the effort you may put into finding them, and they can actually be hurtful to your portfolio. Watching the stock market daily will only stoke your emotions of fear and greed, tempting you to pull the trigger on a sale or purchase of a stock, or switch one fund for another.
One of the most important initial steps to financial independence is self-reliance. Part of this self-reliance is trusting that you can make good money decisions for yourself. You did all the work to set up your financial plan and allocate your money, but by constantly analyzing and questioning your decisions, you could become that micro-managing boss who is always peering over the shoulder of their employees.
Don’t make your cash army nervous. Leave it alone and let it work on the plan you developed.
An Addiction to Financial Pornography: The Analysis-Paralysis Recovery:
To fight the urge to constantly track and monitor your finances, set up a reasonable schedule. Review your finances weekly, then monthly and then quarterly. Let’s face it, the path to financial independence and wealth is not sexy – it isn’t riddled with fancy Bloomberg terminals or flashy stock ticker screens. This financial pornography is great for the big screen, but even the Bogles and Buffets of the world will tell you to buy and hold on – to let your money work for you.
To help you on your analysis-paralysis recovery, I recommend automating as many financial tasks as you can. Here is a list of the best places to start:
- Use Direct Deposit: Most people use direct deposit paychecks with an auto deduction for retirement. Many employers offer this option and can add funds directly to your 401k. If you do not have an employee sponsored retirement plan, ask if they can directly deposit your paycheck amongst different accounts. This is usually do-able, and your employer can deposit a set percentage to one account, like a checking account, and the remaining to another account, such as a brokerage or IRA.
- Make Tracking Simple: Use a program like Personal Capital to aggregate all your accounts, so you can view them all at the same time.
- Automate Bill Pay: There is nothing worse than forgetting to pay a bill or losing a check in the mail. Paying your bills automatically has become easier than ever. Online banking capabilities have taken some huge leaps in recent years, especially at the large banks. Set up all your bills for automatic payment each month. For large creditors, you can receive your statements through an online bill payment system. You can also allow your bank to pay your creditors automatically when you get a statement. For other payments, authorize your bank to send a check to pay your bills with guarantee delivery by a certain date. All you have to do is log in at the end of the month to make sure there is nothing weird with the payments going out and let the system work for you.
- Time Billing Dates Consistently: One of the issues you may run into when you start automating your finances is billing due dates. For example, some bills could be due on the first, while others are due in the middle of the month. This is a complete pain to deal with, especially if you want to log in only once a month to view your bills; however, most companies will let you change your due date. You can change them so all your bills will be due on the same day of the month. That way, it is easy to track and difficult to forget about a random lone wolf payment.
- Scan Documents: You can relieve a lot of stress by going paperless. With everything on your computer and backed up, you can have every document you need, whenever you need it from your smartphone, tablet or computer. You will never have to search your filing cabinet or sweat bullets because you fear you threw something out. To learn more, read this article on my paperless journey.
- Automate Investment Decisions: Betterment is slowly becoming a common finance name. Betterment is when you answer a few short questions and then it will allocate your money into different funds to fit your risk tolerance and retirement goals. Another benefit is automatic tax loss harvesting and a low annual fee. Automation is free for managing finances under $15,000, which is an easy way to kick start your path to financial security.
- Sit Back and Enjoy Life: Once you have put in the time to create a savings plan, set up timelines and focus on a budget, let your system work for you. Checking the stock market or your spreadsheets daily won’t speed up your retirement. Take the time you’ve saved and use it to enjoy being with your family and friends, or start a side gig to supplement your income even further.
Instead of letting your finances run your life, you can take control of them by using today’s tools, like online bill payments, direct deposits and automatic investments. These tools can save you time, money and lost sleep by making it easier to manage your money. Get started today, so you can start enjoying your tomorrows more than ever.