Manage Your Money Like Warren Buffett

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

If you saw a mysterious $4 entry on your income-tax return, would you sweat it? What if you were a billionaire many times over? Would it even catch your eye?

It would if you were Warren Buffett. In an interview several years ago, the great man copped to taking the time to get to the bottom of the puzzling entry (a royalty payment, as it turns out).

If the Oracle of Omaha has time to track down a measly $4 discrepancy, perhaps those of us in the cheap seats should consider carving out an hour or so every few months to check in on our financial affairs. Who knows? That Buffett guy may actually be on to something.

Your $4, $400, $4,000 or $40,000 discrepancy
We all get mired in the day-to-day details of keeping our empires (or gazillion-dollar companies) running smoothly, but now is as good a time as any to host your first-ever You, Inc., audit. All you need is your recent account statements, an agenda (which I've provided below) and some snacks (that's all you).

A personal audit gives you a clear picture of your overall net worth and provides a baseline from which to determine whether you're on the right track. More to the point, this exercise will answer once and for all the burning question, "Where the heck did that $20 bill go?" (Or maybe that's just my burning question.)

In all seriousness, your quarterly financial review should answer four critical big-picture questions:

1. Are operating costs under control?
Have you overlooked new fees and unused services when feeding statement filler to the shredder? Review bills (utilities, insurance, etc.) for funny stuff, and red-flag any pending budget-busters. (Leaky roof? Arthritic pet?) If you don't have a handle on where your everyday money really goes, use the couch potato's budget tricks to get it under control.

2. Are deficits on the downward spiral?
For any lingering "bad debts" (credit cards, car loans), having a payoff plan will keep daily stress in check. (See our get out of debt advice for tips on winning the credit card game.) Note progress and obstacles, such as changes in your credit card terms.

3. Are you adequately funding your cash cushion?
Short-term savings (aka your emergency fund) are best kept separate from your day-to-day cash. Is your cash stash suitably funded? Are you earning decent interest on your dough?

4. Is your investment plan up to snuff?
Review your retirement account (IRA, 401(k)) contributions to see if you're on track to max out the accounts. Evaluate your portfolio's holdings and reassess each position using what investing luminary Peter Lynch calls the "two-minute drill" -- i.e., reevaluate the reasons you bought shares in the business and look for any red flags on the fundamentals.

For more Buffett-esque Foolishness:

Motley Fool writer Dayana Yochim is the sole proprietor of Dayana Yochim, Inc., which serves shareholders buttered popcorn and Twizzlers during its quarterly financial reviews. The Fool's disclosure policy knows the score.

Read/Post Comments (0) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 944815, ~/Articles/ArticleHandler.aspx, 10/26/2016 3:44:10 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 6 hours ago Sponsored by:
DOW 18,169.27 -53.76 -0.30%
S&P 500 2,143.16 -8.17 -0.38%
NASD 5,283.40 -26.43 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes