After a lot of neglect, learning how to organize finances seems intimidating. But these 3 simple steps make it easy!
It started innocently.
First there was the stack of mail you forgot about.
So you missed a bill or two.
Then the late fees began to pile up.
Suddenly, everything seemed to snowball.
How did a few mess ups lead to this feeling of drowning?
It’s enough to make you want to quit the whole thing. There are people out there that just ignore their money, right? Nothing all that bad seems to happen to them.
Except that you do worry. Your money nightmare keeps you tossing and turning on your pillow.
And the not knowing what’s going to happen next is the worst.
So what’s the secret to good money management? How do you overcome the twisting feeling in the pit of your stomach whenever you think about looking your bills in the face?
How to Organize Finances
Back when my Hubby and I were first married, it didn’t take long to get a good slap in the face.
Turns out that we had completely opposite ideas about how money works. It’s something that we’d kind of noticed while dating, but living together and combining everything was a huge wake up call.
No big surprise, right? So many couples have experienced the same thing.
I was the saver. I knew how many payments were left on my car and rarely kept a balance on my credit cards.
He was…not. I’d find unopened bills that left him with no sense of urgency (but made me feel sick to my stomach!).
So I began the work of getting all of our money organized. The debts, the bills, and the bits of savings we’d accumulated.
It took a little time. But having everything in front of us made it easier to make a plan. And everything starts to click once you have a plan.
Here are the baby steps that worked for us.
Step #1: Know What You Owe
You probably have some idea of who you owe money to each month. There’s the rent or mortgage. And the utilities. Some credit cards.
But relying on memory alone isn’t the best idea. It’s far too easy to forget to pay a bill for a month…or to flat out forget you owe on an entire debt for months at a time!
Forgetting a bill is more common than you think. Nearly half of Americans have paid a bill late, and 5 percent of us never pay a bill on time! (source)
The problem with forgetting is that it’s expensive. Those late fees pile up (sometimes so much that it makes paying the bill difficult on a tight budget).
Worse, every bill sent to collections puts a hard ding on your credit report. That means the next time you need a loan, the bank is going to expect you to pay a higher interest rate for the same amount of money.
So what can you do?
Gather together all of those bills. Go online and search your email for digital copies of bills you’ve agreed to.
I often like to double check myself by logging into a free service like Credit Sesame. They’ll have a list of everything you owe.
It might be tempting to skip this step, especially if you are afraid to see just how far in the hole you are. But put on your brave face and do it anyway!
You’ll never take the power back over your finances without knowing what they really look like.
And remember, regular people have dug out of terrible holes of debt over and over. Here’s our own debt story!
You can do it, too! But first, you have to know what you owe.
Step #2: Build Your Own Budget
No one wants to talk about budgets. But not mentioning it in a post called “how to organizing your finances” would be flat irresponsible!
Besides, if you have a bad feeling about budgets, I’m betting you fall into one of two camps:
You probably either a) have never tried to budget, or b) you used the wrong tools and it didn’t fit your life just right.
The right budget for you is one that works with your life AND helps you use your money to build the life you want the most.
Finding that plan can be tricky.
For instance, most budget plans out there are built for monthly budgeting.
BUT…my husband is paid bi-weekly, and I could never make his paychecks line up right with monthly budgeting.
So I built a bi-weekly budget spreadsheet that we use instead.
So many people wanted the bi-weekly budget spreadsheet that I made it available for my subscribers! You can get a copy of that PLUS this guide by signing up for the newsletter here:
If an online, automated system is more your style, I recommend Personal Capital. We’ve been using it for a year or two to track our expenses and see at a glace where our money is going.
If you love charts and graphs (and hate keeping up with receipts or cash envelopes), Personal Capital is perfect for you. (IT’S FREE!!)
Step #3: Make It Automatic
If you’re prone to forgetting to pay bills (or you just hate wasting your time paying them regularly!) you should look into automation.
Most banks and companies make it easy to set up automatic bill pay.
You can set up regular bills to withdraw from your bank account on a certain date. Or you can have it charged to a credit card each month.
Both of those options have risks and rewards. If your paycheck isn’t deposited (for any number of reasons), you could overdraw your account. Having overdraft protection can help with that risk.
Charging to a credit card is always risky for people who aren’t hyper vigilant about not carrying a balance from month to month. You do not want to end up paying interest on your electric bill!
There’s one more automatic thing you can do to improve your money situation in a great way.
Sign up for daily alerts from your most used accounts.
You can get them via text or email. It will remind you that your bank account is running low or alert you to fraud activity on your credit cards.
Enjoy Your Brand New Financial Life!
Starting a new relationship with your money might feel intimidating.
Just remember, taking these baby steps one at a time can make all the difference between a late night with your stomach in knots and the secure sleep a good plan can bring.
The only way to enjoy that feeling is to jump right in! Decide that you want a different life.
What’s your motivation to organize your finances?