25. June 2016 · Comments Off on Saving Your Money: Insanity Vs Sanity – The Step You Must Take to Change Financial Outcomes · Categories: Finance

Getting your financial house in order is always a good idea. If that is your goal, you have a lot of company! The challenge of any financial resolution is to break an old habit, start a new one or both. Failing to change your habits means you will be financially insane.

There has never been a better time to get financially organized, create a rainy day fund, and take control of your money. It may sound challenging, and you may know from past experience that habits are hard to break or create. One thing is certain: the definition of insanity is doing the same thing over and over and expecting different results. Sanity means changing your behavior and doing things differently, so you will get different results-the ones you want.

However, there’s one single thing you can do that will help you create good financial habits, improve your money management and save more. That one thing? Tracking.

Why? Because tracking works the way our minds and our behaviors work. First, we use our imagination to create a plan. Next we build goals and steps to our plan. Finally, we watch the implementation of our plans or, in other words, we track our steps toward our goals.

Almost all financial gurus agree that tracking is critical to financial organization, saving, and sound money management. Evidently, even banks understood the value of tracking because the only thing they gave away was a checkbook register. In fact, tracking is critical to making any improvements at all. Golfers track to improve scores; dieters track to monitor weight loss. Tracking is a small change that leads to better outcomes.

Simply put, tracking is the cause and effect of your money in real time: where your money comes from and where it goes. Only with that knowledge can you begin to improve your ability to save and reach your financial goals. The good news is that tracking is a small manageable step, and all behaviors are changed with small steps.

So what happened to this old-school, commonsense approach of tracking? Banking technology happened! The use of debit and credit cards coupled with electronic banking has derailed the old-school approach of personal money management that was based on tracking. Banks have convinced their customers that there’s no longer a need to track. You can get your balance with the click of a mouse, at any ATM, or over the phone. The question is: Is the balance correct? It rarely is correct due to a variety of reasons, and as you may have learned, “real-time banking” doesn’t always occur in real time. One major problem is that bank balances tend to reflect “false positives.” A “false positive” occurs when you’ve spent money that hasn’t yet been taken from your account. For example, if you pay a $100 electric bill at the utility’s site, your bank account balance is overstated by that $100 until the electric company removes the money from your account, so you’re led to believe you have more money than you do… unless of course, you’re accurately tracking your money.

The market realizes that consumers want to have more control over their personal finances, and many possible solutions are trying to fix this hole. There are many ways to track: the old-fashioned checkbook register, a spreadsheet, or a simple notebook. There are also plenty of apps available to help you track your money. And there is a new hand-held electronic checkbook which lets you track all of your accounts.

Ideally, you must know your bank balance or credit card balance before you make a purchase. The only way to know that is to track, for yourself, what you have spent and how much is in your account. Whatever method you choose, you will quickly learn that the easy step of tracking will help you alter your spending behaviors, so you can begin saving more money.

As you begin to track your purchases, you will begin to feel a sense of control over your finances-money sanity. Also, you will have the information you need to begin to effectively budget your money and save for a rainy day fund-money sanity. By taking the small step of tracking where and what you spend, you are taking the necessary step to creating the most important good money habit-the habit that will help you achieve your goal of improving your money management and gain financial control and money sanity.

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