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Start the New Year Off Right - How to Organize Your Finances.

Posted by david | December 29, 2006

With 2007 coming at us fast and furious, I thought a quick post and link to info about organizing your finances could be of some use. In the past, we used to have our paperwork everywhere, and I could never find anything without spending hours digging through file cabinets, paper boxes, the desk, the bookcase…everywhere. And come tax time, forget it. I was never the type to get my shoebox out in January and fill it all year long with tax documents like donations to charity or Goodwill. So, from LifeOrganizers.com, I give you 5 ways to start organizing your finances so that 2007 will be a smoother year than 2006 was.

1. Consolidate your credit cards.
Rather than having a bunch of different credit cards, consolidate all of your expenses on one single credit card, preferably one that has a low finance rate, and perhaps one that offers cash back or airline mileage on every dollar you spend. This can result in less confusion over which card to use, it can give you a better idea of how much debt you’re accumulating, it may give you more back for your dollar, and you’ll only have to write out one payment check per month.

This is DEFINITELY the way to go. My wife and I only use 2 cards for everything…our cash rebate card and our American Airlines miles card, both from Citibank. This makes record keeping much easier, transactions are easier to find, and as an added bonus, we get some free money or airlines miles to boot.

2. Use a bill paying system.
As soon as you get bills in the mail, they should immediately be placed into a bill paying system. All of your ending bills are then ready to be paid once a week, or once every 2 weeks, etc. Use that same bill paying system to store paid bill summaries, being sure that each category is in its own folder or envelope. Doing this makes it very simple to look something up when necessary.

Even better than this, use online bill paying. All of our bills except rent and one other one are sent directly to Bank of America and they tell us when they get the bill. I hop online, schedule the payment, and I am done. No more stamps, envelopes, going to the post office, nothing. It is a quick process now to pay our bills, and after years (knock on wood) of using this system, we have yet to have even one payment not get to the destination on time.

3. Organize your expenses, as you spend.
Want to know how much you spend each month, so you can determine your monthly spending budget? As you spend, just record that expense. This can be called your Expense Summary. A computer program like Quicken or a simple spreadsheet is great for this purpose, or you can certainly do this with paper and pen.

I say go for the paper and pen. If you must keep track of every penny you spend, physically writing it down as you spend it might make you think twice next time.

4. Balance your checkbook monthly.
In order for you to have a good idea of how much money is sitting in your checking account, which checks have cleared, and any errors that you or your bank may have made, you must balance your checking account. It really doesn’t take that long if you balance your checkbook the same day your statement and canceled checks arrive back from the bank each month. In fact, if you use a computer program like Quicken, you can do this task more quick.

As much as I would like to tell you to do this…I have a confession. I don’t balance my checkbook anymore. I know, I know…but I went a few (read: months not doing it and now I would never catch up even if I wanted to. So yes, please do it. Even though I don’t. I look at my statements, check for weird charges and stuff, but I don’t balance it. Thank you, BofA, for not stealing money from me yet.

5. Keep your tax-related stuff together.
Before tax season, you’ll start to receive tax related information from your job, your bank, etc. Keep all of these tax-related papers in a labeled file folder. This way, when you’re ready to do your taxes, you won’t have to search for the papers you need.

As I referenced at the beginning, it is best to have a place to store any and all documents you might think you will need come tax season next year. It makes life a LOT easier when its time to file.

If you have more ideas on how to better organize your financial files, I would love to hear them!

LifeOrganizers.com

“Moving house is not a way of getting out of debt. Facing up to reality and getting debt help is cheaper and less stressful.”