Did your eyes roll reading the title of this chapter?

One important but often overlooked money habit is to build up a regular accounting habit.

Sounds exciting right!

I know; about as exciting as putting in your tax return.

Yes, I get it. Nobody wants to do it, but it is a good idea!

The thing is, you probably already have some kind of accounting habit and don’t realise it. If you pay bills, you already must do some accounting (or you’re about to when you get your first home loan).

Maybe we should call it something else, like building your wealth making habit!

Does that make it sound more exciting? Hmmm, maybe not more exciting! It does make it sound more important though.

It doesn’t have to take long to do your accounting. You just need to set aside time each week, fortnight or month. If you’re going to do this every week, give yourself 5-10 minutes; if you’re going to do this every fortnight, give yourself 15-30 minutes; and if you do this every month, give yourself about an hour. It really doesn’t have to take long. You can even start with 2 minutes.

The idea here is to create a habit stack. Build one accounting habit at a time until you have a stack of habits that work to form your accounting habit. You don’t have to do all these immediately. Try habit 2 alone or habits 2 and 3 together before adding in habit 4. When you are comfortable, add in habit 4 and then 5 or any other accounting habits you have.

Here are the stacked accounting habits that are useful for when you have a home loan.

–    Money habit 2 = Open your online bank account

–    Money habit 3 = Look at your income & expenses

–    Money habit 4 = Track your home loan

–    Money habit 5 = Forecast your bills

Money habit 2. Open your online banking account

Firstly, the easiest place to start is to turn on your computer and open your bank account online.

That’s right, the place to start right now is to go online and open up your bank account.

That’s it.

That’s money habit number 2. You’ll notice that it’s very easy. So easy that it might even seem a bit ridiculous.

Let’s keep building on that habit.

Money habit 3. Look at your income and expenses

Once you’ve opened your online bank account, look at your income and expenses. Eyeball them to see what you’ve earned and spent each week, fortnight or month.

Keeping an eye on how much is coming in and going out can be a really useful habit. How much are you spending and earning every week, fortnight and month? Are you spending more than you earn some weeks or months?

When we had our first home loan I did this every week. Now I do this about once a month, and I’ll follow it up every quarter and every year.

You can break this down into weekly, quarterly and yearly check-ins.

Weekly habits

Every week eyeball your expenses for the week and how much you’ve earned. I do this because I schedule some bills well in advance and I forget which bills I have scheduled when. If I need to transfer more money into our bills account I do this so that we have enough to cover what we need when we need it. This also gives me a quick way to see if we are spending more than we normally do and why. If I start to see a pattern for eating out that is increasing, I might reign this in over the following week to keep track of this.

Quarterly routine

Every three months it’s a good idea to add up every bit of money spent and earnt.

I do this by downloading an Excel file straight from my bank account. Its really easy to do because you can go to your online bank and export the excel file straight from your bank. You don’t have to write every individual item down. It spits it out automatically for you. If you’re not sure how to do this contact your bank to find out how you can download all of your expenses and income from your bank account.

It’s your money.

Once you have your download you can add in categories for what you’ve been spending your money on. Now, this does sound like a lot of work. I’ve set mine up in a way that makes it automated. And I only have to manually try to work out a few transactions here or there.

Group your expenses into categories. Choose these categories based on your needs. Some categories may include groceries, transport, utility fees, insurance, activities, entertainment and retail shopping. And add in your own categories.

Yearly check-in

Now that you have your excel file from each quarter, once you have a whole years’ worth of income and expenses in your excel file look at where you have been spending your money during the year. For example, what was spent on travelling to and from work, how much did you spend on groceries throughout the year and which months did you spend the most/least amount of money.

Having all this information also makes it really easy to do the taxes.

Having all this information also makes it really easy to do the taxes. Going to the level of tracking every bit of income and expense can be time consuming, but at a very basic level, if you can get into the habit of just looking at where you earn and spend each week is really handy.

Even just eyeballing it is useful. You could do this every day while you are getting into the habit of it. Even checking in on a weekly basis gives you a really quick way to ask myself ‘did we eat out more than usual this week’, ‘did we spend more on petrol or groceries this week’, ‘do we have more bills this week’, ‘have we had any unexpected bills this week’ or ‘has our income changed?’

Looking at your expenses and income is a really useful habit to build because it will help you to see where your is flowing; how it is flowing in and how it is flowing out. And it will show you where you’re spending.

You might see that you’re spending more than you need to on some things. That’s when you can see where your spending is going and you can decide for yourself where you want to be putting that money.

And possibly how you can save more or whether you need to earn more.

Money Habit 4: Track your home loan

It can be very easy to lose track of your progress and to lose sight of your ultimate goal of paying your home loan off faster if you are not managing it.

The only way you can do this is to be mindful of your repayments, your financial situation, your expenses, and to stay in control of those initial goals you created.

If you would like to pay your home loan off faster, it helps to track your progress. It doesn’t take long. We found this to be so important.

When we had our first home loan, I did this every two weeks. Now I do this about every month.

One way to keep track of your home loan is to create a thermometer chart for yourself (payitinfive.com/gifts).

What is a thermometer chart you ask?

You know those charts; the ones charities use to show how much money has been raised; the more money that is raised, the higher the temperature on the thermometer goes until it reaches the top.

If you’re not sure, google thermometer chart!

Create and put it up somewhere visible or keep it on the desktop on your computer.

Whenever you make a repayment, colour more of your chart in (ours does this automatically for you).

You can use this to track when you reach a major milestone in repaying your principal, that way you can celebrate when you reach certain milestones. Such as if you’ve paid $10,000 off your home loan, or if you’ve paid $50,000 or if you’ve paid $100,000.

You could even use one that tracks the months instead of the years.

I used to count down the months and years as well as the home loan amount.

What if I don’t want to use a thermometer chart?

Of course, you don’t have to use a thermometer chart to know how you’re tracking.

The easiest way to track your home loan is to make each of your repayments in line with how you had planned. If you planned to pay $1,200 per week (and this will pay your home loan in the amount of time you want it to), then pay this much each week and keep it up. If interest rates don’t change, then stick to that amount. If interest rates rise, you’ll need to increase that amount. If interest rates decrease, stick to your repayment amount. If you earn more money or you’re saving more money, maybe consider increasing your repayments as well.

If you dip into your home loan, keep a tally of that amount too so you can put it back when you can.

Likewise, if you put extra money in, keep a tally of that amount so you can see when you are ahead.

We also have a super quick tracker that shows you where you’re at without you needing to add it in every week, fortnight or month; you just do this on the fly when you want to track your progress (it’s free on payitinfive.com/gifts. Look for the Super Quick Home Loan Tracker).

If you notice after 3 or 6 months that you are dipping back into your home loan account for bills, then it may be useful to review your home loan and possibly change the length you planned to pay your home loan off in (more on this soon).

Note that if interest rates rise then you need to also make sure that you make higher repayments to stay on track with your repayments. If they fall, keep up the same repayments and you will slowly get ahead of your initial plan.

If you stick to your repayments (and interest rates don’t rise), you will be on track to paying your home loan off in the amount of time you wanted to pay it off in. Stick to those repayments and you’ll be on track. If you do dip back into your home loan account make sure you put that money back in and keep a record of how much you take out.

Money Habit 5: Forecast your bills

Do you sometimes get surprised when a bill arrives; ‘What! Another electricity bill. Didn’t we just pay that?’

Do you ever miss a bill? ‘Here comes another late fee.’

Do you ever pay your bills twice? ‘Oops, how did that happen?’

When we started on our home loan journey, there were new bills coming in—preschool, home and contents insurance, water rates, strata etc—and it was hard to keep track of what we had to pay next, if we had enough money for the bills, and when the next bill was coming. It was hard to plan with all these bills arriving.

I already knew these bills would be regular, and I knew each of them would have their own times they would come in (e.g., our water and electricity bills would be paid every three months, whereas our home and contents insurance would be every year).

That’s when I decided to start planning ahead for these bills.

And oh my gosh, it was one of the best decisions to keep on top of all those bills coming in. It takes about 15 minutes to set up, but once it is set up, it’s a simple check after that (usually up to 5 minutes each time if you do this every week or fortnight), and gee it’s worth it.

There are different bill predictors out there. I find that if I haven’t set them up myself I find them to be a bit of nuisance because they don’t know when I’ve actually paid the bill and they remind me of a bill I’ve already paid (and I can’t tell them I’ve already paid these).

So I developed my own bill forecaster (which you can use for free at payitinfive.com/gifts) which I use to track our bills, to estimate any upcoming bills and I can see all my bills month-to-month. I have shared what I use but this is not automated and it won’t give you reminders, you’ll have to go in and check regularly so if you find an easier version, by all means use that version.

Whatever method you use, stick with one that works for you and use that.

This has saved me many headaches in surprise bills and late fees. That’s why it got a spot as one of my most important money habits.

When you can forecast your bills, you know what you can pay for your home loan repayments.

Want to know which other money habits are helpful to work on? Coming right up in the next chapter!