We’ve all been there before, and it’s a scary place to be: your paycheck arrives or hits your bank account, and suddenly, after a few bills and more than a few unplanned expenses (a brunch here and a holiday there), you look up and are struggling to make it to your next payday. Having organized finances puts you at ease so that you’re not panicking from paycheck-to-paycheck and all of your expected – and unexpected – expenses are covered.
So, we are going to cover how to organize your money but first let's discuss the importance of organizing your finances!
The importance of having organized finances
Having organized finances is important because it gives you a better sense of where your money is going so that you’re not surprised by unexpected expenses. When you keep track and organize your finances, it gives you a better sense of control over your financial life.
You can also identify areas of improvement and achieve your financial goals more efficiently when your finances are organized. You get a clearer picture of your finances so that you can make the next best decision with your money.
Being financially organized also contributes to overall better mental health. When you control how your hard-earned money is working after each paycheck, the stress of worrying about paying your bills eases. It helps you feel better and more secure financially and mentally.
5 Key steps for organized finances
To better know where your money is going and achieve your financial goals, here are 5 simple steps on how to organize your money.
1. Automate your bill payments
One simple step towards organized finances is to automate your bill payments. Automating your bill payments ensures that your bills are paid on time as soon as they are due.
You can automate the payment of your bills by logging into the account of each of your bill providers or calling to set up your monthly payments.
However, if you don’t have enough funds for a specific month to cover your automated bills, you need to proactively call your bill provider. They will work with you to change or cancel your auto-payment so that it doesn’t cause you to overdraft before you have the funds to pay.
That said, automating your finances is still one of the best ways when it comes to how to organize money. It's all about planning accordingly!
2. Establish a budget
A good, solid budget is the cornerstone for how to organize your money. A budget helps track your spending habits, giving you a glimpse of how much your bills and expenses are and where you’re spending the most.
With a great budget, you can see your finances in a more organized way so you can meet your financial goals.
It's a good idea to plan out your budget in advance before your next pay. Start by breaking out reoccurring bills from general spending and put your bills in categories to track how much you are spending in each area of your life.
Be sure to account for and adjust your budget often for miscellaneous spending like eating out or shopping, vacation and holiday gift spending, and for your savings goals.
There are various ways you can break your budget down each month or even biweekly:
The 70-20-10 budget
The 70-20-10 budget is where your break your take-home pay up into three different categories. Use 70% of your income on monthly expenses and bills, 20% for savings and investments like your retirement fund, and 10% on giving or for paying off debt. This budgeting method is an excellent way how to organize money that's simple and effective.
The Zero-based budget
A zero-based budgeting system is another way you can establish your budget. The zero-based budget is where you allocate your entire paycheck to each specific budgeting category until you have nothing left.
The zero-based budget helps you assign an expense to every dollar so that you are spending only what you allocated for each category. It allows you to avoid the temptation of overspending and spending too frequently just because you have money left over.
3. Track your spending
Tracking your spending is a great way how to organize your money because it helps you manage where your money is going. There are many tools you can use to help track your spending that will also ensure you have organized finances:
Build a spending tracker in Microsoft Excel
Microsoft Excel has quite a few free templates you can use to help you track your spending more wisely. Many of the templates include built-in formulas that make tracking your spending easier. It’s as simple as building a sheet and listing out your bills and expenses.
Enable transaction alerts from your bank
Use your bank’s alert system to help track your spending by turning on alerts every time your spend from your account. This helps keep you accountable and aware of every penny coming out of your bank account.
Use a free budgeting app
There are many budgeting apps that are free to use on your phone to organize your money. Apps like Mint, Truebill, and YNAB (You Need A Budget) are primarily free to use. You can link your bank accounts, investment accounts, and more to help track your spending right on your phone.
4. Keep track of your bill’s due dates in one central place
Another way how to organize money is to track your bill due dates. When organizing your finances, it helps to track your bills closely to know when your money is coming out. Keeping track of the due dates for your bills helps to avoid potential late and overdraft fees from your bank.
It also helps you ensure you are paying your bills on time, which ultimately helps your credit score. In fact, 35% of your credit score is your payment history.
One way to keep track of your bills and their due dates is by using a budgeting app on your phone. Most budgeting apps have features that help you keep track of your bills, how often they are due, and when.
Use your personal calendar, to help organize your bill payments and when they are due. Set reminders on your phone to alert you when your bills are due so that you don’t miss a payment.
Put your bills in one important, visible place where you can see them regularly. Be aware of where your bills are to make sure they are paid on time as they come in.
5. Separate your money to better organize your finances
Tangibly track your spending better by separating your income to organize your money. Separating your spending money from the funds you use to pay bills sets limits on how much you can use.
Cash envelope system
Using the cash envelope system is a fantastic way how to organize your money. The cash envelope system is a budgeting tool where you take out only the cash you need after your bills are covered. The cash-envelope system helps you only use what you’ve taken out in cash after paying your bills, and nothing more.
Separate bank accounts
Open up a separate bank account and automatically separate your take-home pay between 2 or more accounts. One account would be for bills, and other accounts for weekly necessities, miscellaneous spending, and more.
A separate bank account helps keep bill payments from other spending. There's no risk of overspending or over-drafting; all of your funds are in different accounts and only used for their intended purpose.
Have more control over your money with organized finances!
Now you know how to organize money so you can stay on track with your finances! Organizing your money gives you relief to further tackle your financial dreams and goals. You now hold the reigns to your financial success by organizing your money.
Make your hard-earned money work for you, and not the other way around. Make it your goal to have organized finances!