We've all been there: your paycheck arrives or hits your bank account, and you look up to find yourself struggling to make it to your next payday after a few bills and more than a few unplanned expenses (a brunch here and a holiday there). Having organized finances allows you to relax, knowing that you won't be stressed from paycheck to paycheck and that all of your expected – and unexpected – expenses will be covered.
So, we're going to talk about how to organize your money, but first, let's talk about why it's important to do so!
The significance of having well-organized financial records
Having organized finances is important because it allows you to see where your money is going and prevents you from being caught off guard by unexpected expenses. It gives you a better sense of control over your financial life if you keep track of and organize your finances.
When your finances are organized, you can also identify areas for improvement and achieve your financial goals more quickly. You gain a better understanding of your finances, allowing you to make the best financial decision possible.
Being financially organized can also help you live a happier life. The stress of worrying about paying your bills goes away when you have control over how your hard-earned money is spent after each paycheck. It makes you feel better, both financially and psychologically.
5 steps to getting your finances in order
Here are five simple steps to help you organize your money so you can better understand where your money is going and achieve your financial goals.
1. Make your bill payments automatic
Automating your bill payments is a simple way to get your finances in order. When you automate your bill payments, you can rest assured that your bills will be paid on time and in full when they are due.
By logging into each of your bill providers' accounts or calling to set up your monthly payments, you can automate the payment of your bills.
If you don't have enough funds to cover your automated bills for a specific month, you should contact your bill provider ahead of time. They'll work with you to change or cancel your auto-payment so you don't go into debt before you have enough money to pay.
When it comes to money management, automating your finances is still one of the most effective methods. It's all about preparing ahead of time!
2. Create a budget
A good, solid budget is the foundation for managing your finances. A budget can help you keep track of your spending habits by showing you how much money you're spending on bills and expenses, as well as where you're spending the most.
You can see your finances in a more organized way and meet your financial goals if you have a good budget.
Before your next pay, it's a good idea to plan out your budget ahead of time. Begin by separating recurring bills from general spending and categorizing your bills to keep track of how much you spend in each area of your life.
Make sure to budget for miscellaneous expenses like eating out or shopping, vacation and holiday gift spending, and your savings goals on a regular basis.
You can break down your budget in a variety of ways each month or even biweekly:
The 70-20-10 budget
When you use the 70-20-10 budget, you divide your take-home pay into three categories. Use 70% of your income for monthly expenses and bills, 20% for savings and investments, such as a retirement fund, and 10% for giving or debt repayment. This budgeting method is a great way to organize money in a simple and efficient manner.
The Zero-based budget
Another way to create a budget is to use a zero-based budgeting system. The zero-based budget entails allocating your entire paycheck to each budgeting category until you are left with nothing.
The zero-based budget allows you to assign an expense to each dollar, ensuring that you only spend the amount you set aside for each category. It prevents you from succumbing to the temptation of overspending and overspending simply because you have money left over.
3. Track your spending
Tracking your spending is an excellent way to organize your finances because it allows you to keep track of where your money goes. There are a variety of tools you can use to keep track of your spending and keep your finances organized:
In Microsoft Excel, create a spending tracker
Microsoft Excel has a number of free templates you can use to keep track of your spending. Many of the templates have built-in formulas to help you keep track of your spending. It's as easy as putting together a spreadsheet and listing all of your bills and expenses.
Allow your bank to send you transaction alerts
Turn on alerts every time you spend from your account in your bank's alert system to help you keep track of your spending. This keeps you accountable and aware of every dollar that leaves your account.
Make use of a budgeting app that is available for free
To organize your money, there are many free budgeting apps available for your phone. Mint, Truebill, and YNAB (You Need A Budget) are examples of apps that are primarily free to use. You can link your bank accounts, investment accounts, and other accounts to your phone to keep track of your spending.
4. Keep track of all of your bill due dates in one place
Another way to keep track of your finances is to keep track of your bill due dates. When it comes to budgeting, it's helpful to keep track of your bills so you know when your money is going out. Keeping track of your bill due dates can help you avoid late and overdraft fees from your bank.
It also assists you in making sure you pay your bills on time, which improves your credit score. In fact, your payment history accounts for 35% of your credit score.
Using a budgeting app on your phone is one way to keep track of your bills and their due dates. Most budgeting apps include features that allow you to keep track of your bills, including when they are due and how often they are due.
To keep track of your bill payments and when they are due, use your personal calendar. To avoid missing a payment, set reminders on your phone to remind you when your bills are due.
Place your bills in a prominent, visible location where you will see them on a regular basis. Keep track of where your bills are so you can pay them as soon as they arrive.
5. Organize your finances by separating your money
Separate your income to organize your money and better track your spending. Separating your spending money from your bill-paying money limits how much you can spend.
Cash envelope system
The cash envelope system is an excellent way to keep track of your finances. The cash envelope system is a budgeting tool in which you only take out the money you need after you've paid your bills. The cash-envelope system ensures that you only spend the money you've taken out in cash after paying your bills.
Separate bank accounts
Create a separate bank account and divide your take-home pay between two or more accounts automatically. Bills would go into one account, while weekly necessities, miscellaneous spending, and other expenses would go into another.
Bill payments can be kept separate from other spending with a separate bank account. There's no risk of overspending or overdrawing because all of your funds are kept in separate accounts and are only used for the purposes for which they were intended.
Organize your finances to gain more control over your money!
You now understand how to organize money so that you can stay on top of your finances! Organizing your finances allows you to focus on your financial dreams and goals. By organizing your money, you now have control over your financial success.
Make your hard-earned money work for you rather than against you. Make it your goal to have a well-organized financial situation!