Catching Up

To begin improving your personal finances, you need to know what you are improving. A big part of personal finance comes simply from keeping track of data. If you are just starting, you probably haven’t been keeping track of your past finances. Fortunately, with everything being electronic these days, you can probably find a lot of the historic data you need to catch up on. The first task you have to do is gather and analyze whatever historic personal finance documents you can find. This would include things such as: spending history, income, savings/investment accounts, and debt. This data will help you in the next step of the course – creating personal finance goals.

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Spending History – With online banking these days, you should be able to find a good portion of your recent spending history. You can sort this data in a couple different ways. One, use the total. Is the total amount of spending excessive, or are you happy with it? Two, break it down into categories. Does anything stick out that you are spending too much on? Three, look at what you are spending on things individually. I personally would use option two, and if you find anything out of the norm, use option three to investigate. For example: option two could have indicated you are spending too much on groceries. Why? Using option 3, you determined it was because you spend $200 a month buying lobster. It sounds obvious, but maybe you didn’t notice buying lobster for dinner once a week cost you $50 for one meal. The easiest way to sort this information would be to use a budget spreadsheet. Obviously, keeping detailed records is more beneficial but it is also work. Choosing a method you can stick with is just as important, so if keeping detailed records is something that doesn’t interest you in the slightest, perhaps recording only the total is the best option for you.

Income – Again, with online banking you should be able to find recent records of this. Knowing your previous income is needed to provide some context for your spending. Spending $5,000 a month is a lot different for someone making $50,000 a year than it is for someone making $200,000. If you can get your old T4’s, it is also nice to see your yearly salary over a period of time. Has your salary been stagnant for five years? You would have to ask yourself why, and what can you do to change that?

Savings/Investment Accounts –  Depending on where your accounts are, your bank or pension provider should have records of these that will be accessible. These records will tell you if your savings or investment accounts are growing or not. If they aren’t, why aren’t they? The up-to-date numbers of these accounts help give you a more rounded view of your personal finance and could highlight areas you need to work on. Make a list of all these accounts – you’re going to be keeping a close eye on them in the future! In the event something happens to you, this also provides your family members a way to find your assets and assure they aren’t lost.

Debt – These records should be obtainable by whoever loaned you the money (credit card companies, banks). Your debt history will show you if your debt is growing or shrinking. If it is not shrinking, why is it not shrinking? Make a list of all your debts. Debt is often the first target of a personal finance plan – so you are going to be keeping a close eye on these as well!

Looking at these things will help give you a better picture on the current overall state of your finances. 

After gathering and analyzing everything, find somewhere to start organizing your personal finance documents. Whether it is in physical copies in a cabinet in your home, or simply a folder named “Personal Finance” on your computer, being organized is a very important part of personal finance.