When I say that word, “forensics”, I’d be willing to bet a multitude of crime dramas come to mind: NCIS; CSI; CSI: Miami; CSI: NY; Crossing Jordan; Forensic Files; Cold Case Files – the list is seemingly endless. It goes all the way back to Quincy, M.E., my father’s favorite show back in the late ‘70’s — Jack Klugman was the man.
Setting aside all the television drama, forensics — when you boil it down to its bare essence, is simple. It is scientific analysis of physical evidence. And it’s not all blue lights, hair samples and DNA. Forensics crosses over to the financial world too. Forensic accounting utilizes accounting, auditing and investigative skills to investigate the finances of an individual or business.
When I sit down with clients or speak to groups about personal finances/budgeting, I stress to people that one of the first things they need to do is some personal forensic accounting. Do a deep dive into your daily, weekly, monthly expenses. You’d be surprised at what you may find and the “criminals” you may catch.
First, get your bank statements from your last three months, specifically the account that your debit card and checks are linked to.Then, get your credit card statements for the same time period. Three months is plenty big enough a sample size.
Let’s first denote and set aside the things that can’t be avoided – for instance, mortgage/rent payment, utilities, car payment, property/auto insurance, property taxes if not included in your mortgage payment and cell/home phone.
Now, let’s put on the gloves and really look at some clues. How many gym memberships? How many magazine subscriptions? How many wine clubs, food delivery services? Any other monthly delivery subscriptions? Dollar Shave Club? Harry’s? Bark Box? What about grocery delivery annual fees? Shine that blue light over here, we have a lot more to examine still.
Music and television. Oh baby. Pandora? Spotify? Apple iTunes? What about television services? You tell me that you cut the cord from the cable giant who shall remain nameless but probably should be criminally prosecuted. Excellent. But what do you have going on in its place? Amazon Prime? Netflix? Hulu? Sling? YouTube TV? HBO? Showtime? ESPN Plus? MLB Package?
Also, go to your Amazon account and your Apple Pay account and check there for recurring subscriptions.Some credit cards, in their online account management, have a place to see all these too.
Now, look at the results of this investigation. If you are like most I know, the amount of these monthly recurring charges will be an eye opener. When we sign on for these things, we say to ourselves, “What’s ten or twenty bucks a month?” Yet, they add up and lead to financial death by a thousand paper cuts.
Think back for a moment to the bills our parents and grandparents paid. They had half a dozen at most. In 201 9, we pay dozens of bills/fees a month and most are nonessential. Again, many are not an egregiously high price point, but in the aggregate — killers.
For our example, let’s say we can cut just $50 per month in nonessential monthly fees. Oftentimes it’s much more but we will be conservative — $600 a year for fifteen years at a modest growth rate of 5% will produce a result of nearly $13,600. It’s not winning the lottery but it’s substantial! Most, when presented with the options, would rather have that growth in wealth versus having four different music subscriptions.
Channeling our inner Quincy and doing a forensic autopsy of our spending habits can be painful for sure but will lead to some satisfying results if you see it through. Shedding some of these financial killers from our lives and putting those dollars to better use may not be sexy enough for a CSI plotline but it will serve our real world lives quite nicely.
Original content provided by Gregory Mattacola, Esq., Financial Adviser at Strategic Financial Services in Utica, New York. Content is provided for educational purposes only and should not be used as the basis upon which to make investment or financial decisions.
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