When was the last time you checked in on your finances? If you don’t know your balance, monthly expenses, and whether or not you’re living within your means at any given point in the month, then it’s time for a financial snapshot. Let us help with these tips.
What is a financial snapshot?
A financial snapshot takes a picture of what your finances look like today. Not after payday, or the first of the month, or after you get your tax return back. But right now. Checking in with your finances as they are now is important to get an honest perspective of your personal spending habits and situation.
It may feel overwhelming to get started if you have never evaluated your finances before. However, it is worth the effort and can be a great first step in establishing good habits and reaching your financial goals.
First, you need to know where you are.
Using bank statements
In order to get a good financial snapshot, it is necessary to evaluate where your money is being spent each month. One way to do this is to review your bank statement.
Online banking with Chesapeake Bank allows you to sign up for e-statements. Once registered, you can access your statements through the website and you will receive an email each month when your next statement is ready.
Once you have the most recent statement, go line by line, recording how much you spent in the past month on bills, utilities, housing, and any re-occurring payments for loans or credit cards. How much did you spend on groceries, eating out, gas, household goods and clothing? Create your own spending categories and sort each line item on your statement into a category.
Now, add up how much you spent in each category. Were there any surprises?
Using Financial Tools with Online Banking
A much easier way to record spending by category is with the Financial Tools available with online banking through Chesapeake Bank. This tool automatically records your transactions and categorizes them by spending type. It doesn’t recognize every transaction, so you may need to go in and add your own categories in order to fully utilize the Financial Tools.
One of the best things about the Financial Tool with your online banking is that it automatically totals each category for you and puts them in a pie chart so you have a visual representation of how you spend money each month.
Next, analyze your spending
Now that you know how much you have been spending in each category (on rent, gas, food, etc.) it is time to get a better idea of your cash flow.
Write down necessary spending items with how much they are each month. These are the non-negotiable spending categories like rent, utilities, car payment, and food. Do not include entertainment or eating out in these essential items. Add up your required outgoing expenses to get a total.
Now do the same thing with your income. Record how much you bring in each month. Is this more or less than your critical expenses? How does it compare to how much you actually spent last month? Take your total income and subtract your necessary outgoing expenses to get the amount you can spend on extra things or how much you can save each month.
Again, this is just a snapshot, a brief picture of your spending habits and financial situation. Knowing where you are will help you to make any required changes.
Finally, set your goals
By taking a financial snapshot and checking in on your personal finance situation, you are able to get an honest idea of where changes need to be made. But just as importantly, it lets you know how much you could be saving or putting toward financial goals.
Take some time to think about what is important to you. Do you want to spend time travelling? Is eating out every Friday an important family ritual? How about saving for a house or paying off debt?
Now that you know how much you could potentially have to work with each month, set some goals to make that money work for you. Use these goals as motivation to make any changes you discovered while reviewing your finances.
To see what Chesapeake Bank can do to help you with your finances, visit chesbank.com or your local branch.
