I was interviewed recently regarding the notion of checking in on your money (both in banking and investments) and how much time one should allocate to this activity. I immediately thought about the twentysomethings that have their trading screens running all day long as they watch candles dance between 9:30am and 4pm like one would watch the northern lights in Iceland. It also reminded me of how many people may obsess about the stock market, but will never **really** know how much money is in their checking account. So I really thought about the “best practices” of watching your money and here is what I came up with:
There needs to be a balance between ignoring your financial accounts and obsessing over them. I’ve known investors who check their stock accounts literally all day every day and I’ve known investors who check their stock accounts once every ten years. The same with your banking, the two extremes are never healthy. I feel that frequency can have a direct impact on your mindset regarding money and finding the balance that is right for you is essential.
When it comes to how often you should check savings accounts, checking accounts, and your investments but my rule of thumb is to have a set frequency for checking on your banking, brokerage and retirement accounts. Weekly for banking, monthly for brokerage and quarterly for retirement accounts.
For example: in banking, our grandparents balanced a checkbook with every transaction and reconciled with the monthly statement to prevent fraud and fish out errors. That was a version of checking it daily, right? Kinda, they checked it only when they had a transaction. There was no obsession, there were also no statements for some old passbook savings accounts (you would bring your bank issued notebook to the teller every week and reconcile your balance on the spot). With the modernization of online banking, we can watch our accounts daily without the added work of reconciliation.
So, how much is too much? For banking, I’d say multiple times a day….unless you’re watching for a transaction to hit. Once you see it (or don’t see it), go back to daily. For investing, I’d say the goal should be to build a portfolio that aligns with your risk tolerance and time horizon and trust your process. Check in Quarterly, unless you are a day-trader, anything more than monthly is too much. And for your retirement accounts, check in annually and trust the professionals to do the trading for you.
Now, of course you need to make changes when something fundamentally changes in your life. Has your income gone up or down? Have your goals changed? Have you made a large purchase and need to replenish your emergency fund? Making adjustments along the way can actually help you stay on track with your goals, just remember to make them because of external factors and not emotional reactions. If you make well informed and educated decisions, don’t second guess yourself and make changes in your finances based on media headlines or what your friends are telling you. Financial goals take time to hit, and giving yourself enough time (and patience) is one of the fundamental building blocks I often see investors miss out on.
Kimberly Enders CFP® CWS® CERTIFIED FINANCIAL PLANNER™
Enders Wealth Management
37800 Van Dyke Ave, Suite 125
Sterling Heights MI 48312
www.enderswm.com
#kimenderscfp
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