When we create financial plans, the goal is to take a holistic view of your entire financial situation. This means looking at all types of accounts, from savings and investments to retirement funds and debts. But in our daily lives, most of us spend our time focused on just a couple of these accounts (mainly checking accounts and credit cards). These are the accounts that handle our everyday transactions, so it’s natural that they get most of our attention. I, for one, am logging in multiple times a week to make sure my checking account balance is sufficient to cover all the bills!
The Day-to-Day Money Management Trap
Our financial attention is often consumed by managing the day-to-day flow of money. We’re stuck missing the forest for the trees, focused on making sure bills are paid, groceries are bought, and hoping that we even have some money left over for fun. But after optimizing where funds go each month, many people don’t have much left in their checking account. They end up feeling like they’re just scraping by after seeing all their money seemingly disappear by the end of the month.
Why Does It Feel Like All Your Money Is Gone?
It’s easy to feel frustrated when it seems like all your money is gone each month. Even if a significant portion of your income is being saved or used to pay off debt (i.e. building wealth), the fact that there’s little left in your checking account can make it feel like you’re not making any progress. I hear this concern from clients all the time. But it’s important to remember why your finances might be set up this way.
The Bigger Picture: Building Wealth Over Time
When you zoom out, the picture can look much better than it feels on a day-to-day basis. Instead of focusing on the balance in your checking account, consider how your financial net worth is changing over time. Are you steadily paying down debt? Are your savings and investments growing? These are the factors that truly matter when it comes to building wealth.
We often do this exercise with clients, and they’re usually surprised by how good their overall financial picture looks. Even if it feels like you’re living paycheck-to-paycheck, when you look at the bigger picture, you might find that you’re actually in a much stronger financial position than you thought.
Takeaway: It's All About Perspective
The feeling of just scraping by is something many of us experience, but it’s important to put that feeling into perspective. By taking a holistic view of your finances and understanding the organization behind your accounts, you can see your progress. The next time you’re feeling stressed about your monthly finances, step back and look at the bigger picture—you might be pleasantly surprised by what you see.
Jim is a financial advisor and owner of Thinking Big Financial, Inc. Thinking Big Financial is a fee-only registered investment advisor offering financial planning and investment management services. Specializing in working with the LGBTQ Community.
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