Uncommon Sense
against the grain...
Ah, the annual barrage of year-end advice and “must-do” lists for the new year has begun. I listen to them with a critical ear and don’t agree with some of them. Here are three that I take umbrage with: “Only look at your accounts once a year”, “focus on savings on things you don’t need like coffee and avocado toast”, and “automate everything”.
Look at your accounts frequently
Damn straight, take a minute every week to see how your accounts are doing. Let’s be realistic, the whole “Only look at your accounts yearly” is for people who don’t need to worry about their accounts. That isn’t most people. Your accounts are where you put your money to work; you should know what it’s doing.
“It’s 10 pm, do you know where your children are?”
Let’s take some of that 1980s parenting advice for our money. You need to understand how much you earn, how much you spend, where your money is going, and how it is working for you. If you can answer the following questions, you are in a good spot:
What is your monthly take-home pay?
What is your average monthly spending?
How much is your net worth?
What asset allocation do you use for your retirement accounts?
Extra credit: What is your marginal tax rate?
Please note that if you are married, both partners need to be comfortable with the numbers and actively involved in the financial conversation. You must be on the same page. I was reminded of this last year while helping someone with her taxes. Reviewing her capital gains/losses, I noticed a large loss (around 10% of her account) despite the overall market being up over 20% that year. When I asked about the loss, she said, “My husband manages it; I don’t know anything about it.” While I can laugh at the thought of the conversation she must have had with her husband that night, the situation itself is not funny. Financial transparency is vital, and both partners need to know where the money is.
Once you are financially independent, you might relax your review schedule. Until then, I strongly recommend the following reviews:
Credit Cards (Weekly) - Check every week for any odd charges to ensure you are spending within your means and financial plan. I set alerts on the accounts for large charges, card-not-present charges, and cash advances. These alerts provide the added benefit of early warning of fraudulent activity.
Bank Accounts (Weekly) - Review every week to make sure there are no odd transactions and, more importantly, that you have enough cash in your accounts to pay your upcoming credit cards and any automated debits.
Utilities and Subscriptions (Monthly) - Check monthly and compare to the previous year. This helps you quickly spot anomalies or unexpected charges.
Retirement and Brokerage Accounts – Feel free to check your retirement and brokerage accounts weekly, monthly, or whenever you like. These accounts are your key to financial independence. It is essential to:
Know your investments and how they are performing.
Understand your asset allocation relative to your financial goals.
Review your accounts regularly to better gauge your comfort level with risk.
If you are unsure about your asset allocation or risk tolerance, speak with a professional. They can help educate you on the pros and cons of your current investments, enabling you to make an informed decision about whether your asset allocation needs to change.
The reality is this: if you set an exercise goal at the start of the year, you don’t wait 12 months before checking your progress. You look at your efforts every day and ask yourself, “What did I do today to get me closer to my goal?” Take that same stance with your finances. Regularly reviewing your accounts and staying engaged are the only ways to ensure you’re taking the right steps daily toward financial independence.
Mind the dollars and the cents will take care of themselves
In other words, “Take care of the big shit so you can worry less about the little shit.” Focusing on high-impact areas, the “Big Shit” will generate significantly more wealth than penny-pinching on every minor expense.
Big Shit - Review the fees on all your retirement accounts and funds. Be ruthless in getting the lowest costs, prioritizing ETFs and index funds. Saving even half of one percent in fees can translate into tens or even hundreds of thousands of dollars over 20 to 30 years. That will save you more than the little shit of not buying that cup of coffee or ordering avocado toast.
Big Shit - In your 20s/30s/40s, focus on maximizing your value to the organization to make the most of your earning potential. Volunteer for projects at work, train to improve your skills, and find a mentor to help you progress in your career. If you are maximizing your earning potential, don’t worry about the cost of DoorDash, a house cleaning service, or a fun vacation.
Big Shit – Identify your financial independence target and set up a plan to get there. Once you achieve this goal, the little shit of dealing with annoying people at work or stressing over minor expenses becomes optional.
Through these examples, you can see that if you focus on securing goals with a high return on investment, you don’t have to worry as much about the small costs along the way.
Don’t completely automate
Automation is great for the “big” things, like your mortgage or retirement contributions. However, I encourage you to pay for the smaller things manually. Here’s why:
Feel the “Pain” - When spending is automated, you lose the psychological connection to your money. It’s like using chips at a casino; it doesn’t feel real. When you manually push through a transaction to pay off a loan or credit card, you actually see the money leave your account. This “pain” of parting with your cash forces you to be more thoughtful about your spending.
Mind Your Business - Automation often leads to passivity. Subscription services count on this. They hope you’ll forget about that monthly fee because it’s tucked away on autopilot. By staying hands-on, your expenses remain “top of mind.” Even if you do automate some accounts, check them regularly to confirm payments and ensure you know exactly where every dollar is going.
Ultimately, personal finance is exactly that: personal. What resonates with one person might not work for another. You might try the exact opposite of my advice and find it works perfectly for you—and that’s okay.
Everyone’s journey is different. I hope that you find a system that brings you closer to your goals. Just remember, you are the only one responsible for your financial decisions. Take that responsibility seriously at every stage of your financial journey.