If you happen to go on vacation and severely damage your finances, or wake up one day and find out that you haven’t been exactly paying attention to what’s going on in your financial life, is it time to start micromanaging your money? The answer to this depends in most part on your “financial personality” as well as knowing what your financial strengths and weaknesses happen to be.
Figuring out whether you need to micromanage your money or whether it’s best for you to put it on autopilot is essential to not just putting your finances in order but keeping them there. There is no “right or wrong” style but, where one takes an active approach, the other one is more “hands-off”. Let’s take a look at both, shall we.
Watching every dime that flows in and out of your bank account (and any other financial accounts that you may have) is called micro-management of your money. Typically it means that you check all of your accounts very regularly which, for many people, is a bit wasteful, but for the micromanager can bring tranquility knowing that they know exactly what’s going on with their money. In essence, it means having complete financial control. The problem is that it can sometimes interfere with other activities of your daily life that need to be taken care of. If it doesn’t however, it’s an excellent way to know exactly where all of your money is, where it’s going and how much you have left over at the end of every month. It’s also a good way to know what you’ll have in the bank tomorrow.
The opposite of micromanagement is putting your finances on autopilot. This means basically that you “set it and forget it” and follow a set spending and savings plan (known as a budget) rather than constantly checking exactly where your money is. In order to do this correctly there needs to be a financial framework in place that hold you accountable for your spending habits, as well as the other people in your life that may be affecting those habits like your spouse and your children. (Again, a budget.) If you have all, or most, of your financial pieces in place and stay on your plan (budget) every month, following guidelines that you make to keep your spending in line, you’re managing your money on autopilot.
Now the task is simply to figure out which of these two systems is best for you. If you are the type of person that likes to know exactly, almost to the penny, where your money is at any given time, micromanagement of your money is probably the best system for you. It means a lot of extra work, frankly, but it’s a great way to stay directly on top of your financial situation all the time.
On the other hand if you’re the type of person that can set up a system and follow it without feeling the need to constantly check and make sure that you’re “okay”, putting your financial habits on autopilot is an excellent system as well. There are certainly a lot of tools available these days, including apps and online financial management programs, to help you do just that.
Once you find a system that works for you, simply do your best to become an expert at that system, use it to the best of your ability and stay the course. In most cases you’ll find that, at the end of the month, both systems work equally well if used correctly.