Want to Organize Your Finances? Take These 8 Simple Steps

Managing your finances can be stressful. There are a lot of things to worry about: your bills, your financial stability, your financial future, and your debts. But you can’t get stalled.

Organizing your money matters is essential to your financial health and well-being. And it doesn’t have to be difficult, as long as you follow these simple eight steps, which include listing your accounts, managing your debt, setting your goals, and getting help when you need it.

1. Make a List of Your Accounts

Organize all of your financial accounts on a spreadsheet. This includes your assets and your liabilities. If you don’t want to create a spreadsheet, you can organize your accounts on paper in a filing cabinet or a binder system. Whatever system you choose, make sure you separate them by category. This means your list should look something like this:

Each account should have a separate line on your spreadsheet or file. This allows you to keep track of your spending and budget and easily manage your finances.

2. Create a Budget

Once you list your accounts, it’s time to create your budget. This involves taking inventory of your monthly income and your expenses. Make sure you include all sources of income, including your salary and any other forms of income, such as rental income, investment income, and any other income stream.

Divide your expenses into any regular monthly bills you pay, such as housing, utilities, food, transportation, necessary clothing, health, debts (loans, credit cards, etc.), insurance, and any other expenses you may have.

If you have any money left over, you can put that money toward savings. If you come out with nothing at the end of the month, you’re spending too much and need to make adjustments.

3. Track Your Spending

Continue to monitor how you spend your money, even if your income exceeds your spending every month. See if you can cut corners and find ways to make minor adjustments in your spending. For instance:

You may also want to consider using a budgeting or expense-tracking app. Some are free with basic services, while others come with more complex features at a cost. You can also track your spending by yourself using a spreadsheet if you’re willing to do the work.

4. Manage Your Debt

Reduce the amount of debt that you’re carrying. This means developing a debt management strategy. Some of the most common strategies include making minimum payments, the debt avalanche, or the debt snowball method.

The debt avalanche strategy involves making minimum payments on each debt but paying more on the one with the highest interest rate first until that one is paid off. The debt snowball method works by paying down the smallest balance first and working progressively until the largest amount is paid.

You may also want to consider consolidating your debt. Debt consolidation involves taking on a loan with a lower interest rate, which is used to pay off all your debts. You then make a single payment to the loan issuer.

5. Set Your Financial Goals

Setting financial goals goes hand in hand with managing your finances. This allows you to focus (and stay focused), reduce your stress, and lead yourself to greater financial stability.

1. List your goals. This could be setting up an emergency fund, saving for a down payment for a home, saving for retirement, or saving for your child’s education.
2. Determine your timeline for each. For instance, your emergency fund will likely be a short-term goal, while retirement may be a long-term one. That down payment for your home? Probably a midterm goal.
3. Create a plan. Figure out how you’ll reach that goal. Will you cut spending and save? Will you use payroll deductions to save for retirement? You may have to sacrifice somewhere to reach those goals, especially if you have multiple goals.
4. Revisit your plan to see how you’re doing. Check your progress at regular intervals to see if you have fallen off course or are still on track.

6. Save Automatically

Use any chance you can get to save automatically. You’re missing an opportunity to save for retirement if you don’t get a 401(k) or 403(b) that your employer offers, and you’re throwing away free money if the company offers an employer match. Remember, you also get a tax advantage because your contributions are taken before taxes are deducted. This lowers your taxable income and, therefore, your tax bill at the end of the year.

Other ways you can save automatically are to:

• Set up automatic transfers between your checking and savings accounts. You can have a certain amount transferred to your savings account whenever you swipe your debit card.
• Have a certain portion of your paycheck split between your checking and savings accounts.
• After you get paid, align a transfer for a certain amount from your checking account to your savings account.

You may be able to save on some payments if you set up autopay. For instance, you can save 0.25% on the interest rate for your federal student loan if you set up autopay.

7. Review Your Accounts Regularly

You will have to come back to your accounts from time to time to make sure they make sense. The time frame depends entirely on you. You may choose to do a weekly, monthly, quarterly, or semiannual review. Or, you can do a review at each frequency, which is probably the best thing to do.

A regular review of your accounts lets you see if you’re meeting your goals, where you’re spending your money, whether any unexpected fees or charges need to be addressed, and whether you can refinance any high-interest rates.

It’s also a good time to review your credit report to see if there are any errors or inaccuracies. If you do, it’s important to report them.

8. Get Financial Help When You Need It

Life can throw some unexpected curveballs sometimes, so it isn’t uncommon that you may fall off track at times. That’s why it’s important to seek help when you need it. Don’t be afraid to ask a financial professional for advice. Getting the help you need can put you back on track.

A financial advisor or planner can give you the advice you need about your personal finances and investments. They can also let you know whether your goals are realistic and how to get closer to them.

The Bottom Line

Finances can be a tough subject to deal with, especially if you don’t have experience or you’re swimming in debt. But taking charge of your money by following the steps listed above can be a great way of organizing your finances. It just takes a little bit of effort and discipline in the beginning, then you’ll find that things get easier as you find your financial groove.