Benefits of visualizing your personal finances

When entering your investments or expenses into a spreadsheet, you might have experienced moments of confusion, thinking, "This doesn't make sense." It could also take considerable time to identify financial patterns or pinpoint areas of loss. The reason behind these experiences lies in how our minds perceive time and the limitations of short-term memory.

According to a research study published in the IEEE Transactions on Visualization and Computer Graphics, the benefits of the Timeline(or temporal visualization or charts) seem to be in organizing and externalizing the events and then helping in discarding irrelevant entities.

This means that visually representing your personal finances as time series data can provide significant psychological and behavioral benefits that empower you to take control of your money.

Externalizing Your Finances Provides Objectivity

By plotting your income, expenses, savings, investments, and debts every month, you externalize this chain of financial events over months and years. This external perspective provides greater objectivity about your financial situation. You can step back and see things more clearly, removed from your own subjective biases.

Example: Income Reign provides a simple chart of your monthly income from investments over a monthly time range. When you can see how your income changes month to month, you can objectively plan toward goals and be realistic when it comes to expenses.

Enhances Problem-Solving

The visualization aspect helps enhance financial problem-solving. You can analyze trends and relationships between income, spending, and savings to find solutions. Income Reign shows you your cash flow and then breaks down categories for your expenses so that you can problem-solve and determine methods to reduce your expenses or increase your income.

Reinforces Accountability

Seeing the timeline of your finances reinforces accountability. It's harder to ignore bad spending habits when you visually see the impact over time. That negative cashflow on the screen motivates you to take ownership knowing that you are losing money month to month. 

Improves Decision Making

Having this bird's-eye view of your historical cash flow makes it easier to learn from past spending patterns and implement positive changes. You maintain context instead of getting lost in individual transactions. It also eases how much you need to store in your short-term memory so that you can make better decisions.

Gains Motivation and Focus

Visualizations motivate us to achieve financial goals by highlighting progress. They keep you focused on the big-picture trends rather than short-term numbers. Evaluating your financial charts identifies areas for improvement.

If you want to take control of your money and change your behaviors, start visually tracking your cash flow over time. The financial insights will give you the power to reach your money goals sooner.

A great tool for this is Income Reign, which provides intuitive dashboards and charts to visualize your income, expenses, investments, and cash flow from month to month. Sign up today to experience the benefits of visualizing your finances over time.

Study Source: Kwon Bc, Javed W, Ghani S, Elmqvist N, Yi JS, Ebert DS. Evaluating the Role of Time in Investigative Analysis of Document Collections. IEEE Trans Vis Comput Graph. 2012 Nov;18(11):1992-2004. doi: 10.1109/TVCG.2012.89. Epub 2012 Mar 19. PMID: 22411889.

*This blog post is for informational purposes only and is not intended to provide financial advice. All readers should consult a qualified financial professional before making any financial decisions. The author of this blog post makes no representations as to the accuracy, completeness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or any losses, injuries, or damages arising from its display or use.