Tips For Organizing Your Finances

The post Marie Kondo and Your Finances discusses the mindset around decluttering and organizing your finances. Here, you’ll be getting some tactical tips on ways to physically and digitally organize your financial life.

Why is this so important? Because when your finances are disorganized, you are wasting both your precious time and money!

Time is wasted when you don’t know where to find important documents or papers, and now you’re having to go on an unintended scavenger hunt to find what you’re looking for.

Money is wasted when you’re constantly paying late fees +/- interest charges, overlooking charges that shouldn’t be there, and overpaying for services that you no longer need.

This frankly sounds awful. People generally don’t like to deal with their finances anyway, and being disorganized probably plays a big role here. It’s hard to have big goals and dreams when you need to overcome financial clutter!

Personal finance is personal, so this process will look different for everyone. Some people are organizing masters- they have files, boxes, and containers for all sorts of items, which they then decide to add touches of design and color. Other people are fine with seemingly random, scattered piles that appear disorganized, but this system makes perfect sense to them.

I aspire to be the former, and although that’s not quite me (my eye for design is not nearly as intuitive as it is for others, and my organizing needs are changing all the time), I did want to share how I’ve been organizing my finances in case you’re looking for a place to start.

PAPER ORGANIZATION

Let’s start with good old-fashioned paper. Paper clutter can be massive and overwhelming!

I open my mail (which I try to keep to a minimum- keep reading) as a part of my daily routine. I immediately sort out what needs to be recycled versus what I need to keep. The “keep” pile falls into these general categories: 

• Bills that need to be paid
• Items that need to be filed (i.e. statements)
• Short term items, like journals that I’d like to read
• Junk mail that needs to be shredded

In order to cut down on paper mail, almost every bill is automated, whether it’s through Bill Pay or having it as a recurring charge on a credit card (don’t worry- we ALWAYS pay in full!). For unwanted catalogs, I have contacted each company and requested that they stop sending their catalogs. Catalogchoice.org is another option.

To cut down on credit card and insurance company offers, you can visit OptOutPrescreen.com. This is a free service provided by major credit bureaus that takes just a minute of your time. You can choose to opt out for 5 years at a time or permanently. 

Eventually, you will need to store your papers. For items that need to be filed, here are some common categories:

• Bank Accounts
• Pay Stubs
• Retirement Accounts
• Investment Accounts
• Credit Card Accounts
• Debt/Loans
• Insurance
• Taxes
• Auto
• Medical Records
• Home Services/Maintenance
• Utilities
• Kids
• Pets
• Work-Related
• Personal documents (marriage certificate, birth certificates, passports, etc)

Within each of these categories, each subcategory should have its own file. We personally keep these files in our file cabinets, and I review and update this filing system every year. 

In addition to file folders, you may want to have these office supplies handy to help you organize:.

• Letter tray
• File Box
• Magazine file holders
• Binders
• Labels
• Mail Station
• Containers

You will also need to think about how long to store your documents. Here are some general rules of thumb:

• 1 month: withdrawal and deposit records until you can reconcile these on your bank statement
• 1 year: Statements, pay stubs, utility bills
• 3-7 years: Any tax-related document
• Forever: Marriage license, divorce papers, birth certificate, adoption papers, estate planning documents

DIGITAL ORGANIZATION

More than ever, it’s important to keep your digital space organized, especially for your finances. Your paper filing system has probably gotten smaller as more and more of your accounts have moved exclusively onto the online digital space. Use technology to keep track of your finances in digital form as you review, revise, and update without paper clutter. You also have the option to link accounts via apps, which can significantly shorten the amount of time it takes to update your information. 

Master Account List

In order to get a bird’s eye view of your finances, you should have a master account list of every single account that is under your name. Many of these accounts can be accessed online, so you will need to make sure that in addition to contact information and account numbers, you know the website addresses, usernames, and passwords. 

Since we’re talking money and numbers, you can easily add balances (for banking accounts, investment accounts, debt/loans) and monthly payments for bills as additional information on this list.

If you need help getting started, check out the free Richer Life DVM Financial Snapshot, which was made to help you create your own master account list (including a net worth calculator). 

There is also the In Case of Emergency Binder, a wonderful resource that includes a place to record your financial accounts, among other important information. If you have any desire to clean up your financial life, it’s essential to have a master list as a reference guide!

Net Worth

Although net worth worksheets won’t include all of your accounts, knowing your net worth is a solid first step in organizing your finances. It’s a good excuse to gather your financial accounts in one place. It’s a number that you can easily track over time and chart your progress. You can read more about the importance of net worth HERE.

Budget

Apps make budgeting much easier, especially as we are using less physical cash and transactions are happening in the digital space.  Popular apps include Mint, YNAB, and EveryDollar. Many people make their own Excel spreadsheets, either their own or using a template. You can opt for low tech and simply use a notebook and a pencil.

When it comes to your budget, it’s important that you understand how your cash flow is doing throughout the month. Are you able to easily pay your bills on time or do you have a problem with late fees? Do your bills seem to come out of nowhere? Bills have different due dates, and the more you have to keep track of, the more likely that you will miss something if you don’t have a good system in place. This is why automation is so key to having a better financial life.

You will need to experiment to find a method that works for you so that you don’t pay unnecessary late fees and associated angst. Your method may include a hybrid of different methods! Remember, this is all about making your life easier (and saving you time and money along the way!).

STICK TO A SCHEDULE

Part of staying organized means that you need to stick to a schedule. Coming up with the perfect system or plan is a big fail if you implement it once and never check in.

Here’s a sample schedule:

Weekly: Open all mail, pay bills, file papers

Monthly: Check bank statements, check your budget

Quarterly: Calculate net worth, review and update your financial goals

Annually: Review and update all accounts, check and rebalance investments, get credit reports (this can be done every 4 months if you check each credit bureau once a year), store files in a dedicated file box and make room for the new year’s file folders

These financial tasks require that you set reminders on your calendar. Again, use technology to your advantage and set it up so that you don’t miss these important financial tasks!

As noted previously, you should be automating your finances as much as you can in order to simplify your financial life. However, you MUST check in on your system on a regular basis to ensure that everything is being executed as planned. Don’t overlook this. Your life is changing and evolving, and this will extend to your financial life as well. You can only set it and forget it for a short while before you check in and make sure that your system is still working as intended. Remember- life is not static is neither are your finances.

While reviewing your accounts, ask yourself whether anything can be optimized (such as refinancing) or eliminated (such as unused subscriptions or memberships). 

Coming up with your own system will take some time as you find a system that works for YOU. But this is well worth your time! This WILL save you time and money once your system is up and running! Not only that, but it will bring peace of mind and a sense of control that wasn’t there when your finances were cluttered and disorganized.

CONCLUSION

I believe that EVERYONE can benefit from taking the time to organize their financial life. A huge roadblock to getting started with any sort of project is when there is clutter or disorganization, even if the task itself is not difficult. It’s human nature to take the easy route, which is to avoid any perceived complications or overwhelm.

Hopefully this post will encourage you to take some action. I have no doubt that you will be grateful to finally have a system that works smoothly and efficiently. This is a crucial step to getting your financial house in order!

How do you organize and simplify your financial life? What sort of tips would you like to share?