Organizing your personal finances can be time consuming and even a little difficult, but that doesn’t mean it’s something you shouldn’t do. The following are a few tips to help you get your personal finances organized so you can save yourself time, stress, and even money over the course of the year.
Set up online banking and learn to use a personal finance program. Personal Finance programs allow you to view all of your accounts including:
- Everyday bank accounts
- Loans and mortgages
- Investment accounts
- Credit card accounts
By being able to see everything in one place you will be able to take control of your finances and make good decisions based on accurate information.
There are several different personal finance programs available. Quicken is a very popular program for both Windows and Mac, but Quicken for Mac is only compatible with American banks. Mac users in other countries may wish to use iBank. Mint, because it is an online service, can be used on almost any computer or mobile device. However, it is currently only compatible with banks in Canada and the United States.
Personal finance programs organize transactions into basic pre-defined categories but may not reflect your actual spending habits. Categories can be renamed or combined and new categories can be added depending on your lifestyle. It may take a few months of examining your transactions to determine the ideal categories for you. It is better to use a few broad topics at the beginning and then become more specific with use. After a few months of using online banking, you may choose to use sub-categories.
Shopping with your debit card instead of cash allows online banking to identify in what stores you shop and will help categorize transactions. You also may choose to keep receipts to enter more information about each transaction. Do not get too detailed. If you routinely purchase groceries and household items, such as garbage bags, laundry detergent and shampoo all at the same time from the same store, consider creating a category called “Groceries, Personal and Household Supplies”. This would encompass everything that is used for your home and the people in it.
Other categories to consider.
- Financial Charges: Many banks charge extra fees for cheques, using another bank’s automated teller machines, or making payments or withdrawals in a foreign currency. If you track this information, you can easily tell how much you’re paying in extra fees. Check the different types of accounts and banking plans offered by your bank. Switching to a different plan may help you reduce these fees.
- Interest Expense: It’s a bit of a shock to see how much interest is paid out on loans or bank overdrafts but it may also be the incentive you need to pay off any loans.
- Charitable Donations: By tracking any donations, you can easily generate a list at the end of the year that will tell you how much you have donated and from which organizations you can expect a tax receipt. It will also be easier to report this information to your country’s tax office.
Simplify bill payments
Reduce the number of bills you have to pay by hand. Sign up for online bill payment services when possible.
If you buy things on credit (a highly debated topic here at Unclutterer), use only one or two major credit cards and cancel store credit cards. Most major credit cards have lower interest rates than store cards and great loyalty programs, including cash-back programs. Remember, just because you pay off a credit card and cut it up doesn’t mean the account is cancelled. Inform the credit card company in writing that you wish to cancel the account. Verify your credit score to ensure that the report indicates the credit card account has been closed as paid in full.
You might consider bundling services where possible to reduce the number of bills you need to pay. By consolidating your various insurance policies with one company, you may be eligible for discounted premiums or other bonuses. Utility companies as well as media/communications companies provide discounts for bundling services like phone, cable, and internet access.
Most utility and insurance companies offer equalized billing. By having a fixed amount to pay every month, it will be much easier to set and maintain a budget. Some companies offer a pre-authorized payment plan where the monthly amount is deducted directly from your bank account.
Designate certain days and times each month to manage your finances. Use this time to pay upcoming bills and update your account balances. You may wish to do your finances every Saturday morning or the first weekday after your payday. Whatever day you decide, write it down in your agenda and stick to the schedule.
If you are using traditional paper billing, keep all necessary items for bill paying in one place. Fill a plastic bin/box with your chequebook, envelopes, stamps, address labels, pen, and calculator. Label the bin “BILL PAYMENTS”. You can even put your bills in the bin as soon as they arrive. Once paid, the paper bills can be stored in a filing cabinet for up to 13 months. Thirteen months is a good timeframe because it allows you to compare the current month’s totals to what they were the previous year — this is nice for things like water bills where you may be able to spot a small leak before it becomes a major one.
If you opt for electronic billing download your bill/statement into a folder on your computer labelled, “Bills to Pay”. Once paid, it can be filed in its appropriate electronic folder. Ideally, the folders on your computer should mimic paper files, e.g. “Utilities – Electric”. Ensure that the bill/statement is in an easily readable format, such as a .pdf file.
Whenever you receive receipts that you can use for your income taxes, such as those for charitable donations, place them in an “Income Tax” file. You won’t need to waste time searching for them come tax time. Many agencies send tax receipts via email so set up a folder on your computer’s hard drive labeled “Income Tax”. Save all electronic copies of income tax slips and receipts to this folder as soon as they arrive.
Organizing financial matters takes some time and energy but you’ll reap the rewards financially and come tax time. With low-cost personal finance programs available, it is easier than ever to track your spending and make better decisions about your financial future.