Optimizing Your Contact With Money

Today’s post concerns itself with your relationship to money, and specifically how you interact and make contact with your own financial self. If you find yourself not spending enough time planning and organizing your finances, read on. If you’re always in front of your computer, tinkering with your finances, this is also for you.

Finding the right balance between not enough and too much contact, and deciding which financial activities are most worthy of our attention is no easy task.

There are three areas of “focus” in my life when it comes to optimizing interaction with our own financial situation – the Pareto Principle, Quadrant II, and time/space optimization.

What’s Your 20%?

The Pareto Principle, or 80/20 rule, is well-known to productivity enthusiasts and has been blogged to near-death. However, the funny thing about principles is that they don’t seem to ever go cliché. They’re principles, right? Always right and always applicable.

The 80/20 rule states, in very basic terms, that 80% of your results will come from 20% of your effort. Last week, I featured Money Under 30’s article about applying the Pareto Principle to personal finance. Now, let’s apply it to your contact with money.

You can spend hours looking at Quicken reports, and hours more trying to find that perfect portfolio allocation. But is it a good use of your time? Is it your 20%?

The answer to the question may lie in some investigative work. Monitor your tracking, bill paying, investing, money-counting, spousal talking, and all other personal finance activities over the next week or month.

A small journal (or mental notes, for the cranially enhanced) will do the trick of letting you remember what you did and how long it took.

Then simply divide the total time spent on these activities (let’s say 10 hours) by 5. That’s 20% of your time, or 2 hours. Here comes the fun part – If you only had 2 hours to work on your finances over the same time period, what would you have done? Ta-da! Thank you, Pareto.

What’s Important But Not Urgent?

My other favorite analysis method comes from Stephen Covey. It involves looking at the four productivity quadrants we can spend our time in, and seeking those in “Quadrant II,” the important but not urgent quadrant.

Not coincidentally, this is also the “procrastination” quadrant – things we know we should be doing but never get around to them. For personal finance, the list includes:

  • Setting up a budget
  • Optimizing savings & investments
  • Reviewing insurance coverages
  • Negotiating lower service prices
  • Looking for alternative incomes
  • Setting up and optimizing financial systems
  • Discussing goals with family
  • Learning more about personal finance

In looking at this list, all of these sound like they would help us advance our personal situation. But when was the last time we sat down to do any of them? Optimizing your contact with money involves setting aside time (a lot of time!) to these important activities and making sure that they get done.

Optimizing Your Planning Schedule and Workspace

There was a time in my life when I would sit down in front of my computer, open Quicken, and “surf around” for hours because I had no idea what to do next. Not very optimized.

One of the best tactics for implementing all of the above suggestions is the weekly financial planning session. Set aside a couple of hours on a Saturday afternoon or a Tuesday evening and do nothing but pay bills, review transactions, and plan for the following week. Make sure some of your tasks also include Quadrant II activities.

To make planning time as streamlined as possible, keep a separate filing bin for financial papers at your planning location (desk, table, couch…). When the time comes for your weekly session, all the week’s information that needs to be processed is immediately available and close by.

Finally, try starting with planning activities before getting into the “nitty-gritty” of bill paying and transaction review. Otherwise, getting through these may wear you out, and if “you’ve been bad,” unmotivate you completely.

Know Your Destination

All of this advice falls on deaf ears if your financial goals are not clearly defined. Ensure that your priorities are in order, and you’re steering your ship in the right direction.

Optimizing your time with money is an important consideration, and will help open up a lot of time and energy in your life if you’re used to constantly stressing out about money. If you’ve found your own methods for streamlining your “touches” with money, please share them in the comments!

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