Organization isn’t a strong suit for many people.
I bet one of the more common complaints people have when it comes to their finances is being able to keep everything organized: keeping track of receipts and bank statements to be specific.
One of the main causes that I have encountered in my career as an accountant is the attitude that more is better when it comes to accounts: the more interest-bearing and investment accounts, as well as credit cards people have, the more wealthy they feel.
However, this is a big mistake in many cases.
It can lead to certain problems like having trouble budgeting, keeping track of expenditures, and even preparing to have their taxes done.
But there is hope for all you organizationally-challenged folks out there, and it’s quite easy to implement.
In fact, you can do it in 3 easy steps…
The fact that banks tend to reward people for bringing in new money contributes to the confusion.
It makes things worse for some people, as it creates yet more paperwork.
That and another chance to mess things up.
In some cases, people open up different accounts to serve differing purposes:
- Household checking and savings
- Vacation fund
- Holiday fund
- Emergency fund
- Repair account
This type of segregation may be good for planning purposes.
It is, however, a killer in terms of keeping track of all the money.
Then you have brokerage accounts: a 401(k) with the employer’s broker, an IRA at a different broker and a separate taxable investing account.
Not to mention credit cards.
I had one particular client last month who had 27 different 1099-INT statements from financial institutions.
That is ridiculous for one person or family to have unless they have so much cash that they need to seperate their cash accounts because of FDIC limits.
But, if that doesn’t describe you, then start closing accounts now.
Keep a household checking account to cover the everyday expenses and recurring bills, a savings account and maybe another interest-bearing account for short-term planning like trips and gifts.
If you have more than one IRA or multiple taxable brokerage accounts, transfer everything into just one for each type.
There really is no need to multiple accounts, and at different brokerages, unless you are a serious trader and each brokerage is better than others at dealing with certain kinds of investment types.
And for those who use multiple credit cards, get rid of all but 2 or 3 if you are worried about your credit score, but if you can care less about that, then close all but one to make things easier on yourself.
Take it a step further
If you really want to get crazy organized, sign up for electronic statements and confirmations.
This way you only get an email whenever a document is issued, and have no papers to have pile up in all areas of your home.
You can create a hierarchy of folders and save all of the PDFs for easy access when the time comes and it is much easier and quicker than fumbling with papers.
Welcome to the electronic age
Almost everyone has a computer these days, so why not take advantage of this amazingly useful tool?
These programs are very powerful tools for tracking your money, generating budgets, automating the checkbook balancing process (and there are plenty of people who need help with that task).
You can not only automatically download transactions, which will alleviate much of the stress involved in managing finances, but you can even scan receipts and attach them to transactions, keeping everything in one place.
A lot of people use Excel as a means to track and reconcile accounts, but if you don’t have the advanced knowledge of the program, you really will not get the most benefit from it.
And, needless to say, if you are still using paper and a pencil, then you really have your work cut out for you.
Computer-based programs take much of the hassle out of recording, reconciling, tracking, and reporting.
In addition, you can also schedule recurring bills and/or deposits to be automatically entered into the registers so that even without updating your accounts, you will have a more accurate view of the balances.
It may cost a little bit of money depending on which option you decide to go with, but the time savings will more than make up for the cash expenditure.
Besides that, you can track not only personal finances, but business finances as well, with the same program in many cases.
Take it a step further
You can get really coordinated by using an online version of personal finance software, so you will be able to update it from anywhere.
Or, you can incorporate a service such as Evernote which is a free notation product by which you can synchronize notes between your smartphone, desktop or web-based access.
Simply create notes for transactions you need to record at a later time, then when that time comes, you will have records that are as detailed as you would like in order to track your finances at any time, from anywhere.
Make a date and don’t be late
In the beginning, getting your programs populated and caught up may take a little bit of time and work.
But, once you are up to speed, you should definitely set a schedule for sitting down and maintaining your records.
Every day would be the most ideal, but that may not be very convenient.
You should try to set aside a little time on a weekly basis at the very least, at a time when you know that you generally have nothing else going on so that you can commit to that time period regularly.
After a few times, you will start getting used to that routine and it will become almost second nature.
Try not to miss any of those scheduled times so you are always up-to-date, and watch all of your finances fall right into place.
Take it a step further
Get other family members involved.
If you have kids, let them set up their own files so they can learn the importance of keeping tabs on where money comes from and where it goes.
Nothing will help a child become financially responsible like learning the value of money and how to manage it from a young age.
There you go, 3 simple steps to getting more organized financially.
Following this guide will help you in having a better understanding of your personal financial picture, and may even help you sleep at night knowing that everything is in it’s place.
And you can spend less time time worrying about being in disarray and concentrating on other, hopefully more enjoyable pursuits.