When you are busy with career, family, or academic activities, it may feel a bit overwhelming to keep track of your income, savings, and expenses. However, organizing your finances is achievable when you have a plan. As long as you have a budget and your bills and paperwork are in order, you’re good to go.
Are you wondering how to go about it? Check out these simple steps to organizing and improving your financial future.
Create a Budget That Works for You
Budgeting is one of the most critical skills to master. Start by writing down your monthly expenses, including debts and all your sources of income. Minimize your costs to ensure that all your payment obligations are met. Make sure your monthly spending does not exceed your monthly income.
Review your budget whenever your circumstances change. As you make the adjustments, ensure that you operate within the set parameters. With a reasonable budget, you can quickly tell where every coin goes.
Set Up a System To Organize Paperwork
Mishandling financial statements and paperwork make it challenging to stay organized. The rule of thumb is to go through all your financial paperwork before creating a system. It will be easier to notice a problem that needs immediate attention. So how should you organize your paperwork?
The documents that you need to store include:
- Bank statements
- Tax documents
- Bills
- Invoices
- Expense receipts
Arrange these documents by account or by month. Choose either an expanding file or hanging files. Remember to organize your documents in chronological order for easier retrieval when needed. You can also use a computerized system to arrange your paperwork for easier data management.
Schedule Paying Bills and Paydays
Scheduling bill payments ensures that you don’t forget to pay them on time. Jot down all your bills and arrange them by due dates. Pick two days per month, for instance, the 2nd and 16th, when you make all payments. If your monthly cash needed for bills is 100 dollars, pay 50 dollars on the 2nd and the remaining 50 dollars on the 16th.
Payday schedules determine how often you pay your employees and contractors. The frequency is dependent on the size of your business or state requirements. Start by identifying your preferred pay periods; it could be biweekly or monthly. Keep it simple by naming your bill-paying schedule according to the payment frequency of your income.
Eliminate Debt
Debt is a financial strain that can disorganize your finances if not cleared on time. Check how much you owe your lenders, the applicable interest rate, and the period needed to clear the debt. Then use a combination of two or more of the following strategies to eliminate the debt:
- Avoid accumulating more debt
- Prioritize debt payments on loans with a reducing interest rate
- Request your creditors to lower your interest rate
- Consider using the debt avalanche or snowball method, depending on your income and loan terms
- Increase your income sources and prioritize the extra cash into paying the debt
Save as Much as You Can
Savings come in handy when you experience financial emergencies. Having some money to fall back on during this period will prevent you from borrowing and increasing debt. The amount you save is highly dependent on your income and expenses. You can start small and increase the amount with time or commit a percentage of your income to savings.
Ask an Accountant or CPA for Help
Organizing your finances boosts your confidence and ensures that you are on the right financial track. However, with so many responsibilities, it can be a challenge not to let something slip. It’s never too late to look for a reliable CPA, accountant, or other financial professionals to help you organize and strategize your finances.