Doing a 4-step 'financial inventory' on my money every month means I don't make mistakes - and save hundreds of dollars

• I made a financial resolution for 2020: Make fewer mistakes with my money. To do that, I do a four-step "financial inventory" every month.
• First, I go over my credit card statement with a fine-tooth comb and identify frivolous purchases I didn't need to make. That helps me avoid overspending the following month.
• Next, I check for overdraft fees, fund my retirement account, and look for mistakes others have made (like unauthorized credit card purchases).
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The biggest resolution I made for 2020 was to make fewer mistakes with my money every month, like overspending on things I don't need and overdrafting my account.

For many years, I let my finances run on autopilot, paying my credit card bill monthly and contributing to my retirement account once a year. I hardly spent any time checking for mistakes or making sure I was balancing my accounts to fight overdraft fees.

I needed to make a change, though, so I set a once-a-month recurring calendar event for the last day of the month to take stock of what's going on with my money; I look at what mistakes I made during the month, and identify ways I can plan for the month ahead to avoid making any of the same errors - or new ones.

Here are the steps I've taken that have helped me save hundreds of dollars and lots of headaches.

Justify credit card purchases

I'll embarrassingly admit that for years, I hardly ever glanced at my credit card statement. I was so focused on making sure I paid on time that I would spend little to no time understanding each purchase and determining if those items were really things I needed.

Now, I make it a dedicated process: I hold a paper copy of my credit card statement in my hand and go through each purchase. I talk out loud, to myself, about why I bought that thing and place a star next to things that were impulse purchases or things I didn't actually need.

After I make note of those purchases, I add up how much I spent that month on things I could have done without (coffee shop lattes, groceries I didn't eat, those buy-one-get-one shoes I could live without) and make a mental note of how much extra I spent.

That's how I'm better able to stick to my budget and how, when something looks easy to buy, I'm more able to think through my purchase - or else I'll have to have a tough conversation with myself about it at the end of the month.

Doing this in the month of January, I realized that I spent close to $250 on things I didn't really need ($50 at coffee shops, $120 on clothing, and $80 on eating at restaurants when I could have made food at home). That helped me stay conscious in February - I was able to reduce those "mistake" purchases by $200, only spending $50 extra on miscellaneous things that put me over my budget.

Check for overdrafts

In 2019, I eyeballed my checking account and noticed several large overdraft fees that occured when I mismanaged the money I had coming in and going out. Those charges added up to over $150 in overdraft fees for the whole year.

To make sure I can pocket that $150 and not spend it on bank fees, I spend time at the end of the month looking at how much is in each of my accounts and how much will be withdrawn, and on what dates, so I can prepare and have enough money in the account at that time (e.g. for rent, taxes, etc.). Doing this has allowed me to avoid overdraft fees so far in 2020.

Fund my retirement account

Managing my retirement fund (a SEP IRA) wasn't something I spent much time on until the end of the year when I'd make a contribution to the fund based on what I could afford. The problem was that I wasn't actively saving money for my retirement fund every month and never had much to put in at the end of the year.

Now, I put all the money I would have spent on bank fees and unnecessary credit card purchases into my retirement account every month. That way, it's easier to stay on track with contributions and it will allow that fund to grow monthly, instead of with a one-time, end-of-year contribution.

Look for money mistakes others have made

Before I call it quits on my financial inventory for the month, the very last thing I do is look for any errors other people have made.

I check for things like charges on my credit card that shouldn't be there, or instances when I was charged twice or the wrong amount of money was withdrawn from my bank account by a landlord or company. Doing this helps catch the mistake in a timely manner and allows me to fight it and get my money back.

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