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One can’t give financial advice for very long without realizing that most of it is not earth-shattering insight. It usually comes down to common sense. So then the challenge becomes one of analyzing why people don’t apply common sense to their finances more often.
Temptation is a big reason, of course. One person goes over a credit limit because she is absolutely convinced she deserved a fancy vacation. Another cannot save any money because he feels he has to buy a new car every nine months. Those situations are tough to deal with because, when you confront people who do this kind of thing with reason why it is a problem, they will start out agreeing with you but then immediately segue into a long rationalization of why they only did it because the circumstances were exceptional.
Believe it or not, though, temptation is not the most common reason people fail to make the right money moves. I find that it more often comes down to time. People are aware of what they should do, but they just don’t quite get around to it.
From a management standpoint, saving time by not addressing important tasks is a false economy. A little investment in time can lead to an ongoing payoff without any further effort. In other words, rather than costing time, attention to these tasks would actually leverage the use of your time in the long run.
In this sense, managing money is much the same as managing a business. A little investment of time in the right spots can produce an ongoing return without much further effort. These are the type of money tasks you need to make time for.
5 money tasks you need to make time for
Here are five money tasks that could have an ongoing return once you take care of them:
- Creating a formal budget process. Notice that I said “budget process” rather than budget. Yes, ideally everyone should formulate a detailed plan of expenditures and income at some point, especially early in their careers when income is most likely to be tight. Going into that kind of detail is the best way to get a good sense of where your money goes; but realistically, not everybody is likely to set out a fully detailed budget. So, you at least need a process that will limit your expenditures — such as a fixed allowance, and rules about how you use credit. Setting strict, big-picture limits tends to force the details to take care of themselves.
- Set a refinancing target. People occasionally look at mortgage refinancing if they happen to notice that mortgage rates are low. That is way too random because mortgage rates can move up and down quickly, and the potential reward here can pay off for many years. Look at refinancing not from the standpoint of where rates are, but from the standpoint of where rates would need to be for it to be worthwhile. Once you have set that target, it would only take an occasional glance at mortgage rates to see if they are moving within range of that target.
- Update your insurance. Insurance tends to sit quietly in a drawer while your life is changing dramatically. Your driving record, your financial resources, the value of the possessions in your house, and the needs of your spouse and children may all be very different from when you last bought auto, life, and homeowners insurance. Check to make sure your insurance is adequate, and shop around to see if you are getting the best rates for your current needs.
- Shop your credit card business. This is one of those slippery things where what you bought may be very different from what you are getting today. Your credit history may have changed, your credit card company may have changed its rate policies, and the competitive landscape of the credit card industry is changing all the time. In short, what was once a good deal may not be so attractive any more. If you regularly carry a balance on your credit card, you should shop for the lowest rate you can find. If you do not carry a balance, you should shop for the most generous rewards package on a no-fee card, since this is essentially a free benefit if you are not incurring interest charges.
- Shop your banking business. Fees on checking accounts and rates on savings accounts are changing all the time. You won’t know how competitive your bank is unless you check periodically — at least once a year, or whenever you are notified of a rate increase.
We all draw the line somewhere. We choose not to pursue every money-saving opportunity if we perceive our time as being worth more than the potential savings. However, for those opportunities which represent ongoing savings, a little investment of time can have an out-sized reward.