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

With the arrival of 2010, I thought a quick post and link to some info about organizing your finances could be of some use. In the past, I used to have my 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. All that changed in the last year for me, and it has made quite a difference. So, from LifeOrganizers.com, I wanted to share with you these 5 ways to start organizing your finances so that 2010 will be a smoother year than 2009 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. I only use 1 card for everything… my Amtrak rewards card from Chase. I was using my American Express Gold Rewards card as well, but decided the annual fee wasn’t worth it for what I charge to it. This makes record keeping much easier, transactions easier to find, and as an added bonus, I get Amtrak miles.

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 my bills that cannot be charged to my Chase card, except rent, are sent directly to Bank of America (for now, as am in the middle of switching to Schwab) and they tell me 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 the bills, and after years (knock on wood) of using this system, I 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: 8) 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. And if you want to read more from Life Organizers, just head on over to the site!

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Comments (7)

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  1. Annie Jones says:

    I balance the checkbook weekly and pay the week’s bills at the same time. It only takes a few minutes a week, because there are few transactions, and makes it easy to catch any math or bank errors almost as soon as they happen.

  2. Ben says:

    I have had your same credit card strategy in the past, but I kept a few cards on hand (when I had balances) to transfer the balance to whoever had the best deal that made sense after paying the transfer fee.

  3. nan says:

    For my taxes, I keep 12 folders (paper folders – old school) for receipts and check stubs every month. I have used the same folders for probably four or five years now.

    Every few months, I input the info into a method my accountant likes (Excel, these days). By the time January rolls around, we are just waiting on 1099s and such. I need to get my taxes done early for financial aid for my kids. It has to be done and submitted by February 15, so I don’t have a choice on getting it done. It’s really helped me stay organized and on top of my finances, though, especially since I am self-employed, like you.

    I schedule all my bills (most are e-bills) to be paid through my bank on the 30th of the month. This is REALLY simple. I do very little banking this way. I love it.

  4. Craig says:

    I really have worked on automating my finances better. This way I can just automatically pay bills right away and transfer money into savings accounts to make things easier and help me budget better.

  5. If you do your taxes yourself, which you should by the way, you should have a file for UMEs (unreimbursed medical expenses), and JREs (Job-related expenses) and track your charitable contributions throughou the year. These are the biggies that I track thru the year and it makes tax time a breeze

  6. Justin says:

    I’ve just gotten my spending/checkbook under control by the simple act of saving receipts in my wallet and recording them daily…it’s shocking how big a difference this 3-minute-a-day routine has made.

    As far as my filing cabinet, though, I don’t think there’s been any semblance of organization there since I first bought the thing! I know all of the important documents are in there somewhere, but I couldn’t necessarily find them within an hour if I needed to. I should make this a priority in the new year.

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