Why Mental Math Can Ruin Personal Finance

Too often people will rely on their memories in order to handle their personal financial matters. But in the chaos of our lives relying on your mental math can have disastrous effects. Unless you are diligent about regularly analyzing your spending and your income, you can easily lose track. You need to find a method to keep track of your finances that’s simple to use. One such method of tracking your expenses is by using a personal finance app on your smartphone. You should use whatever method works for you.

Visuals Matter

The first step toward good financial habits is to develop a personal budget. A budget consists of a spreadsheet that identifies all of your financial responsibilities for a weekly or monthly period of time. In order to compile a budget you need to gather all of your bills and income statements so you can calculate how much money goes out every month versus how much money is coming in. By creating a written budget you have a visual picture of how much you can afford to spend on a number of expense categories.

In addition to the budgeting sheet you should also establish a system for tracking other personal financial matters. From your bank checkbook to your savings goals, you need to have a handle on how you are managing your money. Software and complex money management programs often become too confusing for consumers looking for simplicity in their lives. People often invest too much money in technology they will hardly use because it is too difficult and too time consuming.

Forget Complicated Software

Luckily, there are alternatives that are much simpler for tracking money. By being able to incorporate your budget, your checkbook register, and your other personal financial matters you get to create one big visual of how your money is working for you. It is also a great mechanism for fixing financial matters not working in your favor. You can see where you are spending too much and take the steps necessary to improve your money matters.

When people neglect to track every penny they spend, they will not do their budget any justice. There is no accurate way for you to recall exactly what you spent and why you spent it if you are not writing it down. In order to perfect your finances, you should incorporate 15 – 30 minutes of each day to reviewing your finances and stay involved with your credit.

Order your credit report every six months to a year and review it for accuracy and fraud. Pay for your credit score annually to see where you stand credit wise. This allows you to make more informed financial decisions when you need to rather than guessing about your finances. This is one of the leading reasons why people fall into the traps of debt and make purchases they truly can not afford.

By keeping written track of what you are spending and knowing what has happened in your financial life from one week to the next, you stand a better chance of building a more solid financial foundation for yourself.

Money management can be as simple or as complex as you want it to be. A few simple spreadsheets or a money management template can help you to incorporate creating a financial picture that keeps you proactive in your tracking your money. By staying involved and stopping your reliance on mental math – figuring out money based on what you think you have – you can stay within your budget at all times.

About The Author

Edwin is a marketer, social media influencer and head writer here at Save The Bills. He manages a large network of high quality finance blogs and social media accounts. You can connect with him via email here.


Related Posts

2 Comments

  1. Rob

    Couldn’t agree more a simple budget sheet all you need & there are some great templates out there. I find the best place to keep a budget sheet is within Google Docs this make it accessible thought any computer or android phone allowing you to keep track of your money on the move!

    Reply
  2. Kaylynn

    I had no idea how to approach this before-now I’m loeckd and loaded.

    Reply

Leave a Comment

Your email address will not be published. Required fields are marked *