Knowing Your Numbers Can Lead You to Financial Freedom
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What is this four-part series about and who is hosting it?
Here's your Money Briefing for Sunday, January 7th. I'm J.R. Whelan for The Wall Street Journal. This is Episode 1 of a four-part series of Sunday episodes about making the right moves to plan your financial future. We're taking a deep dive into a new book, The New Rules of Money. Up first, managing your money properly starts with knowing your numbers, all of them.
What is really important about knowing your numbers is that there's a difference between assuming things are good or bad and being rooted in reality. And a big part of personal finance and a big part of what we talk about in the book is learning about your personal money life. This is part of learning about your relationship with money.
We'll talk to the book's authors, WSJ's Beret Lam and Julia Carpenter, after the break.
To get a grasp on your finances this year, there's a place that advisors say you should start, knowing your numbers. To learn more, we're joined by WSJ personal finance reporter Julia Carpenter and deputy coverage chief Beret Lam, authors of the new book, The New Rules of Money. Thanks for being here.
Thanks, JR. Thanks for having us.
Why do financial advisers say ‘know your numbers’ is the best place to start?
So, Beret, let's start with you. Some people might think it's not necessary to know every number in their finances, or they might actually be afraid to know every number. They might say, well, as long as I can pay my bills, I must be okay. So why is it important to know your numbers?
What is important? really important about knowing your numbers is that there's a difference between assuming things are good or bad and being rooted in reality. And a big part of personal finance and a big part of what we talk about in the book is learning about your personal money life. This is part of learning about your relationship with money. If you're a person who doesn't Definitely don't do that. I do look at my bank account every day.
Yeah. It was a rough stretch during, I mean, it came up in December, but still, that's a lot of stress if you're burdening yourself with all the numbers.
Yeah. I mean, you can schedule time to do this, but if you don't know where you're at, then you can't improve. And so if you want to improve, you have to know where you're starting from. Julia, I remember you writing some of this chapter about being, how do we start this journey of being rooted in reality and why that's so important for our financial lives? Can you talk a little bit more? Yeah.
Yeah. I also – one of the things I always say when I talk about this with people is that it's really scary first, but oftentimes doing this, it's not as bad as you think it is. People have an ambient sense of, okay, I have this much in my bank account right now on my checking. I have a fine amount in savings, but God, I have so much on my credit card. And then when you actually look at all of these things together and put them into the bigger picture – It's not as terrifying as that. Or maybe there is like a little bit of a wake up moment, but then you can do something about it and it doesn't feel as overwhelming.
So it's more than just knowing what's in your bank account.
And it sounds like a lot. We literally give you a form and a little checklist to do it so it doesn't sound like a lot. But when you're doing it, you're able to see where your perception is faulty and where your perception is spot on. So you might think, OK, I put a little bit of money away in that random investing account I opened. Every now and then I'll deduct some money for my checking account, but it's not that much. And then when you're actually looking at it, you're able to understand where your blind spots are.
People have a dozen accounts, all these numbers and amounts and some in red, some in black.
Yeah.
How do they approach all this, this waterfall of numbers?
I would say do it in small doses. Part of taking control of your financial life is realizing where you're at and where all those accounts are at and how they come together, really getting the full picture of your financial life. Like if you're only looking at the accounts that are going up, you might spend more.
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Chapters
8 chapters
1
What is this four-part series about and who is hosting it?
0:02–1:29
2
Why do financial advisers say ‘know your numbers’ is the best place to start?
1:29–4:43
3
What fears or misconceptions do people have about reviewing all their accounts?
4:43–5:54
4
How do you audit your finances without getting overwhelmed?
5:54–8:39
5
What are the five ‘buckets’ for organizing your accounts and assets?
8:39–10:21
6
How should emergency savings be calculated and where should it be kept?
10:21–10:41
7
How can knowing your numbers help you set realistic money goals and habits?
10:41–11:04
8
What are the next steps after cataloging your finances and where to learn more?
11:04–11:18
Speakers
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