How Often Should You Review Your Finances?
The digital world and its associated advancements in technology have in many instances rendered the “paper world” obsolete. We live in an age of electronic billing, automatic payments, direct deposits and rapid money transfers between accounts.
Gone are the days of strictly waiting on paper bills and account statements to arrive in the U.S. Mail for us to review at the end of a monthly billing cycle.
Sure, paper bills and statements still exist, but who among us has not gone “paperless” on some or all of our accounts? Most (if not all) of our accounts co-exist online now, and with that comes the freedom to monitor our accounts on an ongoing 24/7 basis.
And with that also comes the question of how often we should be checking in on our accounts. We don’t want to become obsessed – but how often should we be reviewing our accounts and financial statements? What’s “too much?” What’s not enough? Let’s take a closer look.
Balance Your Checkbook
The once common practice of manually balancing a checkbook has fallen by the wayside – or at least there is a general demographic divide between those who do and do not manually balance their checkbooks.
Most young people grew up learning how to use online banking and apps and never learned to write down banking transactions as they occurred before reviewing a bank statement at the end of the month and making certain that the transactions and balances matched up. The overriding purpose of doing so is to uncover any errors or fraudulent activity.
Well, the same holds true today – only now we “balance our checkbook” faster and more conveniently online to discover errors or fraudulent activity while also keeping track of how much money is moving in and out of the account.
A quick review of recent deposits and purchases will confirm that you have received the money you have expected while also providing a sense of how your purchasing activity has been offsetting the cash flow. This is an important step in verifying that you are remaining within the guidelines of a clear written monthly budget.
Another reason to review your checking account online regularly, as well as your online credit card accounts, is to guard against fraud. The Fair Credit Billing Act protects consumers against fraudulent activity conducted against debit and credit cards, although it is important for a potential fraud victim to act quickly following any instance of fraud.
Consumers are responsible for a maximum of $50 – and in many instances, consumers will have zero liability – when any fraud is reported within two business days of its occurrence. Beyond two business days, however, liability can extend upwards toward a maximum of $500.
If a consumer waits longer than sixty calendar days from the date on the statement that includes the fraudulent activity, things can get a lot worse – liability can extend to the full amount of the fraud.
Therefore, early detection of fraudulent activity matters, and this is made far easier through regular monitoring of accounts online.
How Often is Enough?
So, how often should you review your online checking account and credit card statements? The answer is……there is no such thing as checking them too often! Getting a little more specific – once a month is not enough – we need to stay on top of our deposits, purchasing activity and monitor for potential fraud much more frequently than just once a month.
Once a week is a lot better – but even from a budgetary standpoint, remaining within the confines of a written monthly budget could require us to check things more frequently. Every day? Well, that’s probably not completely necessary – but the best frequency likely lay between every day and once a week.
This really should be the target range – and it can easily happen when it becomes somewhat routine to check in with your accounts. Remember, we want to guard against fraud, too. It is equally important to watch those credit card purchases and keep a close eye on balances to make sure that things never get out of hand.
Reviewing your accounts is not something that truly needs to be done every single day – yet it won’t hurt (except in potential wasted increments of time) if you do so. In order to develop a habit that revolves around verifying deposits and purchases within your checking account and monitoring credit card purchases while eyeballing against potential fraudulent activity, your frequency really should be at least twice per week.
Regardless of the size of your business, you should be reviewing your financials often. Many small business owners are surprisingly negligent in this practice, leaving things to an end-of-the month review that is insufficient for a number of reasons.
First of all, it’s vitally important to ensure that your financial statements are remaining truly accurate – any deviations should be detected quickly and nipped in the bud. It’s simply not possible to base business decisions on improperly stated financials.
Next, regular reviews illuminate which specific lines of business are doing better than others and can therefore lead to effective, strategic decisions related to resource allocation. If a particular unit is strong or experiencing unexpected seasonality, it may make sense to double-down on financial and/or human capital investments.
Conversely, unexpected weaker performance can speak to a need to make tougher decisions regarding headcount and fund allocation. Regular, if not daily, review of all relevant financial and performance metrics makes it easier to make future-oriented decisions that can positively impact overall business performance.
Without such regular review, a business owner is willfully operating in the dark and ignoring potentially critical information that can have a bearing on future performance.
Regular review also allows for taking into account all relevant tax considerations of potential business decisions before they are actually made. Since there are often methods to structure transactions that limit tax liability, bringing in a tax professional may be necessary at times, and you should always have a professional ensure that your financial statements are accurate, reliable and useful. It can be the difference between surviving, thriving, or going out of business entirely.
About The Author: Steven Brachman
Steven Brachman is the lead content provider for UnitedSettlement.com. A graduate of the University of Michigan with a B.A. in Economics, Steven spent several years as a registered representative in the securities industry before moving on to equity research and trading. He is also an experienced test-prep professional and admissions consultant to aspiring graduate business school students. In his spare time, Steven enjoys writing, reading, travel, music and fantasy sports.
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