You're not bad at reading numbers

Spreadsheets are good. Pictures are best.

Your brain processes images 60,000 times faster than text. In fact, you can grasp what’s going on with a simple picture in a fraction of the time it takes to blink. By comparison, getting the gist of what numbers and words are telling you takes much more effort and time.

Now, think about how you interact with your personal finances. That’s a part of your life that’s likely filled with numbers and sentences but woefully short on helpful pictures and images. For most of us, ‘dealing with our finances’ is harder than it needs to be.

A visual desert

Most of us experience our financial lives in the worst possible way: by trying to ingest and process a large set of numbers in one big gulp. That’s precisely what you’re doing when you log into your bank’s website to review your recent transactions.

Because our brains are not optimized for handling text, scrolling through your spending history always feels like work. It’s no surprise that we rarely go further than a cursory glance, crossing our fingers that nothing looks ‘off’, then quickly moving on to the parts of life we actually enjoy and look forward to.

Without good images and visuals, it’s very hard to get a big picture view of what’s actually happening with your financial health.

Arguably the most important part of my job as a data analyst is presenting information. Sure, working with data is critical, but none of it matters if people can’t understand what it means.

Compared to squinting at numbers, visualizations burst on to center stage and command attention. With the right visualization, anyone, not just top brass or people with Ivy League educations, can quickly understand what’s going on and start asking better questions and making better decisions.

Visual abundance

When it comes to getting your head around your finances, the best thing you can do is find a way to turn everything that matters most into easy-to-understand visuals.

Below are two different versions of a month of spending for a fake bank account.

Figure 1: Tabular data

As you can see, Figure 1 is just a lot to take in. Even though it’s already ordered, it takes effort and brainpower to see that the top 2 expense categories make up 60% of the monthly spending. Compare that experience to figure 2 below.

Figure 2: Visualized data

A lot easier right? You instantly notice the two huge bars on the left and the comparatively short height of everything else. It takes almost no brainpower to see that all the action is in the Groceries and Pets categories.

As someone who makes a living spoon-feeding insights to decision makers, I believe everyone is capable of improving their financial lives when they have the right information presented in the right way at the right time.

Seeing the big picture

The right set of charts allows you to pull yourself out of the minutiae of your bank’s website (or your budget’s rows and columns) and begin to reason at a higher level. There are innumerable benefits to this, but here are three that are top of mind:

Directionality - Charts and images that play out over time give you the “rest of the story” that helps make sense of the current moment.

Knowing what you spent on groceries is one thing, but knowing if that’s normal or not is how you keep anxiety and stress in check.

In the chart below, the most recent grocery bill appears to be on the high side until you realize that it’s in line with the two months before that. Maybe this is a new normal that you shouldn’t feel bad about.

Figure 3: A new pattern is emerging starting in October

Proportion - Charts make it easy to see which pieces make up the majority of the whole. If you’re trying to save more money, it’s far better to focus your effort on adjusting the big levers than spinning your wheels on the small stuff.

Let’s look at the spending breakdown in Figure 2 again. It’s clear that driving across town to buy cheaper gas might feel good and responsible in the moment, but it isn’t going to move the needle very much if you’re actually trying to cut costs.

Figure 2 (again)

Focus - A small handful of numbers can tell you everything you need to know about how healthy your finances are and whether they’re getting better or worse. A simple visualization can cut right to the chase, directing your gaze first to what matters most.

The dark blue bar at the end of the Figure 4 (below) shows how much money is left at the end of the month. The dark blue bar in the middle (savings capacity) shows how much of your income is typically left on any month.

Savings capacity is the best measure of your financial health, but it’s completely out of reach if you’re only looking at bank statements.

Figure 4: All your most important numbers in one place

Next steps

The next time you find yourself struggling to understand what’s going on in your financial life, ask yourself when was the last time you had a good visual to look at. Chances are that it’s not your fault that this part of your life is hard to figure out.

If you find yourself struggling to make sense of a grid or list of numbers in the form of a spreadsheet, bank website, or budget app, just know that this is inherently a hard task for everybody. It’s not just you.

I’ve been a personal finance nerd for the past decade, and even after completing an MBA, it still took me far too long to truly appreciate the incredible power of a simple visual.

Here are a few tools that you can implement right away to help increase the number of helpful visuals in your life (no masters required):

How to set the perfect budget target

Stop sabotaging your financial progress

Taking a data-centric approach to improving your financial life is kinda my jam, so be sure to subscribe to this newsletter for more hot takes, tips, and tools.