Cashing Up - Why?

Why Cashing Up Is Your First Step to Financial Control

You want to get control of your money, start a budget, and maybe save up for that big purchase (or just stop panicking every payday). That's fantastic! But you need to know your starting line. Before you start tracking expenses, creating budgets, or setting financial goals, there's one crucial step most people skip: cashing up. This simple process is the foundation of effective money management, yet it's often overlooked in favor of jumping straight into expense tracking and busgeting.

What Is Cashing Up?

Cashing up means recording your current financial position, i.e. taking stock of what you actually have right now across all your accounts, assets, and debts. Think of it as taking a financial snapshot before you start your journey. You're establishing your starting point.

Why Cashing Up Matters

Without knowing where you're starting from, you can't measure progress. Here's why cashing up is essential:

• You can't track what you don't measure. If you start logging expenses without recording your initial balances, your account totals will be off by thousands of dollars. That $3,307.50 in your checking account? That's not going to magically appear in your expense tracker unless you tell it that's where you're starting.
• It reveals your true net worth. Cashing up forces you to face reality, both the good and the uncomfortable. Yes, you need to include that credit card balance and that loan you've been mentally avoiding. But you also get to count that emergency fund and those investments you've been building.
• It creates accountability. Once you've documented your starting point, you can watch how your decisions affect your finances in real time. That's powerful motivation.
• It uncovers forgotten accounts. When was the last time you checked that old savings account? Or calculated the current value of your precious metals? Cashing up brings everything into the light.

How to Cash Up: The Process

The cashing up process is straightforward but requires honesty and thoroughness:

1. Gather your information. Check your bank accounts, investment accounts, cash wallets, credit cards, loans, and any other financial accounts you have.
2. Record current balances. Note the exact balance as of today (or a specific date you choose as your starting point). For liquid assets like bank accounts, this is simple. For illiquid assets like property or precious metals, use current market values or reasonable estimates.
3. Include everything. Don't cherry-pick. Include the savings account with $10,000 and the credit card with a ($350) balance. Both matter.
4. Distinguish between liquid and illiquid assets. Your checking account can be converted to cash immediately. Your house cannot. This distinction matters for understanding your true financial flexibility.
5. Set up your hierarchy. Group related accounts together. E.g. all bank accounts under 'Bank Accounts', all debts under 'Debts', all investments under another. Another possibility is to group the estimated value of your house and the mortgage together. Then you can immediately see how much you are in the black, or whether the mortgage is underwater. This organization will make tracking and analysis much easier going forward.

Common Mistakes to Avoid

• Rounding or estimating too much. Use actual balances. That extra $23.47 matters when you're reconciling later.

• Forgetting about debts. Your net worth includes what you owe, not just what you own.

• Mixing currencies without conversion. If you have accounts in multiple currencies, decide on a base currency and convert everything to that standard.

• Procrastinating. The best time to cash up was yesterday. The second best time is right now.

Once you've completed your cashing up, you have a solid foundation. Every transaction you track from this point forward will keep your balances accurate and give you real insight into your financial trajectory.