Organizing your money can be hurdle especially if you are busy juggling a million things at once. There’s also a mental component to this as well, maybe you avoid it because you are afraid of what you will find. However, the best way to combat a problem is to confront it and addressing your money mindset will make a big difference with this exercise. Following this guide will help you clear the path and create a structure that you can use to fearlessly and consistently organize your money starting today.
Step 1: Book Time in Your Calendar for a Money Date
That’s right – you are going to go on a date with Your Money. Start by finding a time that works for you on a weekly basis and book it on your physical calendar or the calendar on your phone. This will enable you to prioritize this time and force you to get it done.
Step 2: Gather all Financial Documents
Get all your credit card statements, bill statements, bank statements, student loan statement and any other documentation with your money matters. Organize them based on what needs to be paid and what needs to be reviewed – for example insurance statements or investments statements.
Step 3: List all your Expenses and Income
Ok using pen and paper (or for those who love Excel spreadsheets) list all your expenses: car payment, utility bills, gas, food, rent/mortgage payments, credit card bills etc. By looking at your statements, you will be able to know how much you pay on a monthly basis and what you owe or need to pay. Also, write down your monthly income amount – gather all your sources of income, money from your job, money from side hustles etc.
Step 4: Subtract Your Income from Your Expenses
Once you know your fixed monthly income, whether from a steady job or side hustles or if you work on a part-time basis, the amount you typically get paid – document this. Then add all your expenses together and document that number as well. Subtract your expenses from your income and if you get a positive number, then you have a surplus. This money you can save or invest – we will discuss this in a later post.
On the other hand, if this number is negative, then you are operating at a deficit. You may have to explore ways to cut back or increase your income to achieve a positive number. The good news is that you know where you stand and you are in a good position to take action.
Step 5: Review any bills/services that you are paying that you don’t need
This is the part where you assess your credit card statement and bank statements to see if you have any unnecessary bills that can be canceled. Look for subscriptions – do you need all of them or can you cancel the ones you no longer use? Or did you sign up for a free trial and forget to cancel before you were charged? Cancel those subscriptions and free up space in your bank account.
Look at some of your bills – is there a way for you to negotiate with your service providers to get a better rate? If you have cable, can you switch to a streaming service and save some money? Explore all the ways you can cut your bills and achieve savings.
Step 6: Assess your Bank Statements, Insurance Statements
With this step, go over your bank statements carefully, do you consistently pay overdraft fees? Look at ways to avoid this – please note that if you are going through a rough patch – call your bank and ask for some leniency surrounding your situation. If you pay overdraft fees because you struggle to manage your checking account – leave an amount in the account that you will not touch so that way you save on paying additional fees.
Look at the type of bank accounts you have – if your savings account interest rate is low, look at switching to a high interest savings account or another bank with more competitive rates.
Additionally, you should examine your insurance premiums whether they are life insurance, car insurance etc. Assess to see if you have sufficient coverage on your car or if the deductible works for you. Do the same thing for your life insurance and other policies you have. Understand what’s covered and what’s not covered and assess your situation to see what you might need to add or remove.
Step 7: Automate, Automate, Automate
If you manually pay your bills every month, switch to automating this. You can either do this through your service provider or automate the bill payment through your bank account. Also, and this is very important – automate your savings. Set up a system where you save the same amount every month and ensure it gets deducted from your bank account or from your paycheck (if your employer provides this option). Furthermore, automate your insurance premiums, have them deducted from your account and automate any investment accounts you may have. Your future self will love you for this.
Step 8: Keep Your Financial Documents in a Safe Place
Ensure that your financial documents are filed according to the type that it is categorized under. So keep all bills together, all insurance documents together, all investment documents together, pay stubs etc. That way, they are easily accessible when needed and if you need them for tax purposes, you can find them without scrambling.
Conclusion
Now you can choose to do all these steps on one money date or you could tackle different steps on different dates. However you choose to do it is up to you. The most important step is to start and get on your way to financial clarity. Learning how to arrange your money will give you peace of mind and a sense of accomplishment. In the end, that’s really all you need.
Thanks for reading.
xoxo.
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