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Keystone Habits of Personal Finance
- Track every dollar you spend
- Track the monthly changes in your net worth
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You can find out more information by listening to episode 11 of this podcast.
1. Track every dollar you spend
(Budget basically) I recommend tabulating a budget at least once a month. I like to do this the first week of every month. That first week I’ll tabulate every purchase I made in the previous month and then make a planned budget for the current month.
2. Track the monthly changes in your net worth
Tracking is by far the most important keystone habit for personal finance success. The simple process of tracking your spending will allow you to identify areas where you can improve your spending habits. Ideas for expense reductions and new savings will appear magically over time as you gain a better understanding of your current spending and whether that aligns with your goals and values.
Meanwhile, tracking your net worth will provide encouragement and visibility of progress for the hard work that you are doing. “What gets measured, gets managed.” –V. F. Ridgway. When you actively choose to measure your personal finances, you will begin to take active steps to improve your personal finances. Independently, both of these habits will have positive impacts on your personal finances over time. However, if you combine these two tracking habits, you will benefit from lollapallooza effects which create greater benefits than the sum of the parts.
Tracking your finances first provides awareness, then opportunities for change, and finally encouragement as progress becomes visible and self-reinforcing.
If you want to improve your personal finances, I highly recom mend adopting these two keystone personal finance habits. Track every dollar you spend and track the monthly changes in your net worth.
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