How Much Time do Americans Spend on Their Finances?
According to the Bureau of Labor Statistics, Americans spend about 43 minutes per day on average shopping and spending their money, but only a fraction of that time thinking about financial planning. On average, Americans spend just over 2 minutes per day on the combined activities of “financial management” and “financial services and banking.” That’s about one hour and 12 minutes per month, which isn’t a lot of time for household members to come to an agreement on their financial goals and budget accordingly.
But spending too much time engaged with your financial situation can lead to financial stress. So how much time is appropriate, and more importantly, how specifically should that time be used?
What Financial Planners Recommend
Annually: Set Goals, Automate, and Review Your Credit Report
“I truly believe that most people spend more time planning for a one week vacation than they do on their investment and retirements each year,” said Ashley Folkes, a Scottsdale, Arizona financial planner. And that’s probably making it difficult for families to stay on the same page financially. About 59 percent of Americans are living paycheck to paycheck, and 37 percent of Americans would need to borrow money or sell belongings to deal with a $400 unexpected expense. Low incomes and rising living costs are partially to blame, but so is a lack of individual financial planning.
At least once per year, you should sit down with your family, look at your income, plan a budget, and set saving and investing goals for the year. Two in five Americans have never had a budget, so the process may be new to you. Here’s how to set up a budget:
- Add up your monthly bills
- Subtract that amount from your monthly income
- Add up your minimum payments for each debt
- Subtract that amount
- Allocate what’s leftover to:
- Spending categories such as food and gas
- Extra debt repayment
- Savings and investing
From there, the more you can automate your money, the less time you’ll have to spend each day worrying about cash flow. Set up automatic payments for all your bills, including credit cards. And automate deposits into a high-yield savings account along with your retirement account.
You should also check your credit report at least once per year to identify potential mistakes or negative marks and act accordingly.
Monthly: Review Your Credit Card Statements and Your Budget
Automating your bills doesn’t mean you can ignore your finances each month. “One of the most commonly neglected tasks that I see is reviewing your transactions, statements, and bills every month,” said Eric Roberge, a Boston financial planner at Beyond Your Hammock. “Most people enroll in auto bill pay, or just pay their credit card statements and bills without actually going through each transaction line by line. This sounds tedious, but it’s really important to do,” he added.
One of the reasons this is important is that it allows you to check for mistakes and fraudulent charges. If you catch these errors right away, you likely won’t be responsible for them; you can ask for a refund from the retailer or dispute the charge with your credit card company. But if you just look at your overall balance, you may not notice any issues, and end up paying more than you need to.
You should also check your spending against your budget to make sure you didn’t end up in the red. This should involve anyone spending money in your family, since you’ll want to use this time to reevaluate your budget for the upcoming month.
Weekly: Review Your Online Banking Account
You should always be aware of your balance so you can avoid overdraft fees. At least once per week, review the charges and deposits in your checking account for accuracy. Fortunately, most banks have banking apps you can use that will save you a trip to a physical branch.
Daily: Track Your Spending
If you want to stick to a budget, you’ll need to keep track of every purchase. You can either do this manually with pen and paper or a spreadsheet, or you can use a budgeting app.
The Benefits of Devoting Time to Financial Planning
Healthy money management habits have a positive effect on your overall well-being. A survey from the Certified Financial Planning Board found that people who prepare a household budget feel more secure and confident in their finances and have less anxiety over money woes.
Furthermore, spending time on your finances is the key to being prepared for emergencies and ready for retirement. You should have at least three months worth of expenses in an emergency fund and put away 15 percent of your income into a retirement fund each year.
And finally, setting aside time to discuss your household’s finances with the rest of your family will reduce tensions surrounding money in the home. When everyone is involved in setting goals and budgeting, family members will be less likely to argue over their finances. A third or more of arguments between spouses are about financial issues. Spending enough time setting financial goals together will help reduce the frequency of these arguments.
Make sure you set aside enough time for financial planning that you know where your money is going and feel confident in your future security.