Organize Your Finances for Financial Success
Organizing your finances is the only way to routinely pay your bills on time, deal with your debt, and develop a savings plan.
Take it from someone who spent most of her twenties as a financial hot mess!
Being disorganized when it comes to personal finances is exasperating.
Financial disaster always seems to be just around the next corner.
When you are financially unorganized, it’s easy to be completely unaware of how badly unorganized you really are!
Today let’s take a look at nine simple ways to organize your personal finances for future financial success!
1. Easily Calculate Your Net Worth
Before we get into the nitty gritty, it’s important to get a bird’s eye view of your financial situation.
This might be uncomfortable for you to come to terms with. However, you won’t be able to improve your personal finances until you get a basic idea of your net worth.
To calculate your net worth, simply subtract your debts from your total assets – savings accounts, checking accounts, real estate, and/or retirement accounts.
Make a list of every single financial asset you have and every single outstanding debt you have left to pay.
When you have two comprehensive lists, subtract the total debt from your total assets.
If you’re left with a negative number, you have more debt than you have assets.
That’s okay.
Again, it’s only by coming to terms with the actual numbers that you can create a plan to defeat your debt and start saving!
It is helpful to calculate your net worth every month or every couple of months.
Some people even track this number on a graph to see how it fluctuates over time.
2. Get Familiar with Your Credit Score
Some financial experts say you shouldn’t worry about having credit or a credit score.
Others say that a good credit score is essential for taking out good debt and making big investments.
Personally, I care about having a good credit score and find certain forms of credit useful.
Having a good credit score can also be important in case of emergencies.
You can decide whether or not this is important to you.
With apps like PrivacyGuard and Credit Karma, tracking your credit score is easier than ever.
I receive free monthly credit reports from Experian provided through my Chase accounts.
None of these credit trackers hurt your credit score when you use them.
Now you can keep close eye on any changes made to your credit score!
Most of these platforms also offer credit simulators so you can preview different scenarios for increasing your score.
3. Get Organized with SMART Goals
Perhaps you have heard about SMART goals before. If not, a SMART goal is one that is
Specific
Measurable
Attainable
Reasonable
Time-based
To be specific, your goal needs to address the five w’s – who, what, when, where, and why.
Who is setting the goal, what they want to achieve, when they will begin and end, where they will tackle the goal, and why it is an important goal to reach are all good criteria to address when creating a SMART goal.
A measurable goal is one for which you can create a set of criteria to demonstrate your growth.
A goal that is not measurable might be, “I’m going to get better at finances.” How do you measure getting better at finances?
A more measurable goal would be something like, “I’m going to save $1,000.” That is something that can be measured.
Attainable and reasonable go hand in hand as they both address setting goals that are within your reach to complete.
The opposite of this would be to say, “I’m going to become a millionaire this month,” when you only have five dollars in your pocket.
Making sure your goals are attainable and reasonable sets you up for the success of realizing them sooner than later.
Finally, make sure you set a timeframe for your goal that will stimulate you to complete it!
To add on my example from earlier, you might say “I’m going to save $1,000 in the next three months.”
Setting a deadline for your goal makes it real and will spur to you action more than a goal with no specific timeframe.
Goals are easy ways to organize your finances because they keep you focused on what you’re working towards.
4. Organize Expense Tracking
Experts have been clear with this one over the years – those that track their expenses spend less money!
This could be as simple as writing down every single purchase you make or you could have a complex receipt-filing system.
The choice is yours, but whatever you do, make sure you’re getting familiar with what you spend!
Check out Truebill for a great mobile option.
Tracking expenses is one of the most easy ways to organize your finances.
5. That Darn Budget
Budget – my least favorite “b” word.
For years I avoided budgeting like the plague and let me tell you that the amount of money I overspent was staggering.
It should come as no surprise that creating a budget is the simplest way to organize your finances.
When it comes to setting a budget, think of it less as you being controlled by your money and more as your money being controlled by you!
I’m not going to go into detail on budgeting here since I have other articles on the topic, but the golden rule is that your income should always exceed your expenses.
6. Sort the Mail
Do you hate mail as much as I do?
I used to hide it in my desk drawers and put off dealing with it until the utility companies were calling me to collect overdue payments.
Trust me when I tell you the procrastination wasn’t worth it!
Create a system for dealing with mail as it arrives.
The best practice you can put into place is paying bills immediately when they arrive.
It’s five minutes of inconvenience for a month of not worrying about it – that’s not a bad payoff!
7. Easily Organize Bill Pay
Set up a checking account exclusively for your direct debits and monthly recurring payments.
Then calculate the total amount of all your recurring payments and schedule an automatic monthly deposit of that amount from your paycheck into the new checking account.
You will have peace of mind knowing that your essential bills are taken care of and you won’t have any overdrafts caused by direct debits.
This also allows you to effectively budget the rest of your money for the month without having to factor in all of your bills.
8. Organize Important Records
At my mom’s house growing up we had the “important box” which was a gray hanging file box where we kept all the most important papers.
Here you could find the birth certificates and social security cards of each family member, as well as property and car titles, among other things.
As an adult, I have my own system for keeping all my important documents in one place.
Rounding up your documents shouldn’t take more than half an hour and then you can rest easy knowing they are all safely organized in one spot.
9. Create an Emergency Fund
You never know when emergencies are going to strike – be they job loss or illness or an economy crash.
One way you can stay ahead of the game is by putting savings away emergency fund.
World-famous economist, Dave Ramsey, suggests starting with a $1,000 emergency fund before growing it to cover your expenses for 6 months, should you be without employment.
Remember, at any point in time each American is just three bad months away from being homeless.
Get organized and get an emergency fund in place before pursuing any other financial goal.
Financial Success
What are your favorite ways to organize your finances? I have lots of great information related to personal finance and working from home. Be sure to check out my latest content!