Get organized. What do you think of when you hear those words?
A color-coordinated closet, an orderly garage, or a well-organized pantry. Something Marie Kondo would be proud of. Of course, these are all terrific examples of getting organized. Cleaning out physical spaces can be emotionally liberating; discovering what you have and knowing how it benefits you or doesn’t.
When it comes to getting organized, your finances should also come to mind. But the truth is, many of us don’t think of our personal finances as something to organize. And if you do think of it, you may not even know where to begin.
When your personal finances are in order, you have a better sense of control over your money. Being organized helps you to make smarter financial decisions as well. Can I really afford that vacation? Do I have more money to put toward savings? Is it time to shop for new auto insurance?
Organizing your finances will help you get the answers to questions like this. Here are eight tips to get you started on the right path with your money.
Whatever works for you is the right filing system. You’ll want a system that allows you to organize documents including your bills (paid and unpaid), receipts, pay stubs, tax and investment documents, any loan paperwork as well as insurance policies.
Prefer to go paperless? Many of these documents are available electronically, or you can scan your documents then shred them. You can create folders on your computer or within your email provider to keep all your files organized.
Whether you use an actual calendar hanging on your wall or your phone’s calendar, fill it with reminders to pay your bills. Don’t forget to include payments to yourself - that is, any savings and retirement accounts you have.
If you have trouble remembering to pay your bills on time, consider setting them up on autopay. You may even save money by doing so! For instance, many auto insurance companies offer a discount if you enroll in autopay or pay in full.
If you have any credit cards with a balance, make it your mission to pay it off. The average credit card interest rate is 16%, according to creditcards.com.
Also, it’s a good idea to review all the credit card and bank accounts you have open. In general, it’s best to keep unused credit cards open so that you benefit from the credit history. However, if you aren’t actively using a credit card and there’s an annual fee with it, you might consider closing it.
Create a budget to control your spending; consider your needs vs. wants vs. savings goals. Review your budget monthly and revise it as necessary. Creating a budget can seem daunting, but the payoff is worth it.
One common, easy-to-use method is the 50/30/20 budget. This method has you categorizing your finances into three buckets: necessities, wants, savings/debts. Necessities should account for no more than 50% of your monthly income, 30% goes to cover your wants or variable expenses (like a gym membership), and the remaining 20% goes toward any savings or debts.
If you have credit card debt or loans, pay the maximum amount your budget allows. Creating your budget will help you determine how much you can put toward your payments to reduce your debt.
Invest in a shredder to get rid of anything with personal and/or financial information on it. This can help minimize your identity-theft vulnerability. The general rule of thumb is to hold on to important documents, such as taxes, for three to seven years.
Everyone has fixed expenses like auto insurance, electric, and mortgage or rent. These are bills that we can’t avoid because they’re for services or things we need, and the payment amount doesn’t change by much, if at all.
Reviewing these bills on a regular basis helps you to stay on top of any rate increases or surprise fees. A service like Squeeze can help take care of this for you by shopping for these household bills on a regular basis to make sure you always have the best deal or lowest rate.
Organizing anything whether it’s your home or your finances certainly takes some time, but starting is often the hardest part. Mark a day on the calendar to take the plunge, and I promise you the benefits will be worth it. Keeping your goals in mind will help you to stay on track - and stay organized!
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