Get Your Finances Organized

I get it. Your life is busy and it can be tempting to let financial organization fall to the side. The truth is, though, being disorganized can hurt you! Late payments can cost substantial fees and finance charges. Overlooked information can jeopardize your security and cause you to miss important deadlines.

Not to worry, though. You’ll find that you can easily make progress by taking some simple steps to rid yourself of the clutter and chaos. It’s not difficult to stay on top of your financial life. Here are my top tips to get your finances organized this spring:

Step 1: Get It On Your Calendar

Someone once advised me that “if it’s not on your calendar, it’s not real.” That goes for almost anything and is an especially wise suggestion when it comes to managing your money. Therefore, the first thing I recommend is that you grab a calendar and block out time — regular appointments with yourself (and hopefully your partner) — to get and keep your finances organized.

I suggest you start with a weekly 45 or 60 minute session. As you get things under control, you should be able to back this off to 30 minutes. Find a time when you know, realistically, you won’t get interrupted and aren’t likely to cancel on yourself.

For example, we have our appointment set for Tuesday nights at 9:30 PM. My daughter is asleep (usually) and my work schedule is less hectic on Tuesdays so I’m able to focus better. While I personally could do this even later, my husband and I needed to find a time that worked for both of us. He’s more of a morning person and I’m a night owl. This was a decent compromise for us.

Step 2: Clear the Clutter

All of your paperwork should be organized so you know exactly where your receipts, financial statements, and bills are filed. There’s nothing worse than going in search of a needle in a haystack when you need back up. To do this, create a designated money management area in your home. This area is for processing and filing paperwork as well as handling mail and online accounts. This will prevent you from losing important pieces of paperwork under a landslide of unimportant junk.
Each day, take a look at your money management area and think about what you can immediately get rid of. Junk mail, email clutter, pieces of paper. Get rid of it. A wastebasket and recycling bin by your area is essential, as is a shredder to prevent identity theft.
Overflowing file cabinets or piles of paper getting to you? Consider moving to a paperless setup. For heavy duty projects that you would like to knock out quickly, I suggest you look into a Fujitsu ScanSnap with a multiple page automatic document feeder that scans both sides of a paper with one pass. It’s fast and that’s what you need if you want to cut through a mass of physical clutter and are afraid that you might need whatever it is you should be tossing. Now these scanners are not cheap. I paid just over $400 for my version but it has made a world of difference. It also comes with software to help organize your records. The files you save (I save to PDF) become searchable.
Tame the paper when you are traveling by using a portable scanner or a scanner app on a smart phone. Before I bought my Fujitsu scanner, I used Neat Receipt. I also use the Genius Scan app on my iPhone and iPad. It works really well when I’m on the road and need to scan receipts or a few pages, but I would not recommend it for larger jobs. Neat Receipt has added newer and faster products since I bought my portable device and while it’s a good product, I still favor a mid-range Fujitsu ScanSnap for larger jobs.
When storing documents electronically, create a consistent method to ensure you are saving documents in a centralized storage location that is secure and backed up. You do not want to have documents on multiple devices.
For some items, we still need paper files. It’s just my preference, but I usually retain the last 2 calendar years of bills and file by paper folder in addition to the current year records. Then at year end, I scan the furthest year back and shred what I don’t need. So for now, I have one paper file my 2014 records, my 2015 records and now my records for the first part of 2016. In December, I will scan and shred my 2014 info. The main files I have are:
For tracking cash flow we use an online system that I make available to my clients through my financial planning practice. Depending on the accounts you add to the program, it can record your income, expenses, and net worth. Some people like Mint.com since it will automatically download your transactions. However, my personal experience has been that it does not always work smoothly, you need to train the system so it learns how to categorize your expenses, and some bank login credentials do not sync consistently.

Step 3: Schedule Your Money Flow

For the next step, I prefer using a spreadsheet, but some like a plain old notebook. Whatever is easiest for you, go with it.

With a calendar at hand, start by listing the core expenses you have to pay every month, like the rent or mortgage, utilities, car payments, tuition, insurance, credit cards, etc. List them in order by due date, making sure to include the company you are paying, and the amount.

Next, list your income estimates by date as well as estimates for variable cash expenses or a weekly cash draw to cover fluctuating expenses like groceries, dining out, gas, travel, etc.

Please note that if you are self-employed and have fluctuations in your income, you may want to set this up so you are paying yourself a regular “salary” from a special cash reserve account that receives the variable inflow of money. Profit First by Mike Michalowicz is a great book that shows you how to set up accounts when you’re a business owner, but I find it useful for folks that are not only self-employed but those that have large variances in their pay, such as folks in sales. I recommend reading it and if you get stuck or need more support, hire a financial professional or accountant to help you with this strategy. A tax pro can help you make sure you are adequately withholding taxes throughout the year so there are no tax filing surprises.

Using this, I like to track our estimates for income and expenses, always looking at least three months out at a time, so I can see if there are any gaps or issues that we need to prepare for, such as covering those special expenses that happen only a few times each year.

Step 4: Automate

The first part to automating your finances is to make sure you pay yourself first. Have contributions taken from your paycheck and directly deposited into a savings or investment account. Where the money actually goes is based on your goals and financial plan. I’m not covering that topic in this post, but if you don’t set the money aside in some manner before it gets into your operating account, it’s very likely you will spend it.

The next part to automating your finances is using the cash flow list you created in step 3. Now that you have a list and know when everyone needs to be paid, determine which bills you can pay on an automated basis. If you set up electronic bill pay, make sure you understand exactly how the system works and when the payments will be taken out of your account.

For those bills that can’t be paid through automatic payment, layout a schedule where you pay them in advance and prepare them once a week during your money management appointment. This way you are grouping your bill-paying tasks which is a much more productive manner than trying to remember to pay bills every day.