Welcome to the 2nd week in the financial focus month.
This week will for some of you be really easy, for others not so. There is just one goal here: finish the week with an exact list of all the bank, building society, credit union etc accounts, cards, loans, pension pots, investment accounts, student loans, lines of credit, mortgages and alike, and how much money is in them or is owed on them. If there is money involved, list it out. If it’s a debt, list it out. If it’s a single bond somebody gave you 20 years ago and it still hasn’t matured, list it out.
Auditing your accounts is a pretty important step in getting a grip on your finances. Yes it can be daunting, yes it can be unpleasant. But ultimately, this job won’t do itself for you and it is you who keeps a hold on what your financial life is like. So buckle down, take 2 hours of your day and start listing things out. Here is the order I use and recommend:
- All current/checking accounts
- All savings accounts
- All credit cards including store cards
- All personal loans including car loans, furniture and home goods loans
- All student loans
- All mortgage, home improvement loans and any loan accounts that have a lean on a property
- All investment accounts
- All pension pots, including employer contribution pensions
- Business debt associated with you personally
- Anything else
Find the balances out for all the accounts once you have listed them out – this step is important as it helps you to get a good grip on how much money you actually have and is especially useful if you have a large number of accounts. In my own case, the list looks somewhat like the below, with a small number of balances not provided today:
- HSBC £0 (I don’t keep money in my current account past payday)
- PKO 1071 PLN
- Monzo £0
- Revolut £270
- ISA £6500
- Bonus Saver £2000
- Flexible Saver (undisclosed)
- PKO (undisclosed)
No consumer debts or outstanding credit cards, skipping the list to mortgages
- Nationwide 1 £42,360
- Nationwide 2 £146,000
- HL £1450
- Scottish Widows £8611
- Nutmeg £6740
- Royal London £2588
No business debt.
- Paypal £0
The order I have listed things out is not coincidental – it follows a logical sequence of “how much immediately accessible money there is, how much do I owe and how much do I have stashed away that’s not easily accessible?”. This sequence has been put together to help you to get a good understanding of where you stand.
If you then fancy tallying out your liquid assets vs debts you will have a good understanding of where you financially are and what sort of actions might be of benefit. In example, if you are drowning in debt, you will see the ratio of your money vs your debts be skewed towards the debt heavily. If you have a ton of money in your current account but pennies in your pension pots, maybe it’s a good idea to start funnelling some cash into long term savings etc.
But before it’s time to make any big financial decisions, really start with the basics. Find all your accounts, list them out and keep the list safe and easy to find for you. If updated regularly it provides a great way to view your finances at a glance.
Next week is all about the famous ‘no-spend’ challenge. But as said in my Five things to do in January post, I’ve set the bar pretty low for January. Instead of doing months-long one, let’s start with one week.