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Simple, practical ways to organize your money and financial life.

Organizing your finances is an important step toward achieving financial stability and reaching your long-term financial goals. However, the process can seem daunting, especially if you’re not sure where to start. Fortunately, help is available – so let’s explore a few simple ways to get your financial house in order.

1. Gather your financial information

The first step to organizing your finances is to gather all of your financial information in one place. This includes bank statements, credit card statements, investment account statements, and any other financial documents you may have. Once you have all of your financial information in one place, you can start to make sense of it. This is a good starting point for figuring out how much you spend on a weekly or monthly basis, how much you owe, your interest rates, etc. 

2. Create a budget

Creating a budget is one of the most important steps you can take to organize your finances. Start by listing all of your income sources, such as your salary or any side income you may have. Then, list all of your expenses, including fixed expenses like rent and utilities, as well as variable expenses like groceries and entertainment. Use a budgeting app or spreadsheet to track your income and expenses and make adjustments as needed.

As a guide, you might try the 50/30/20 budgeting plan. This involves spending no more than 50% of your take-home pay on needs, 30% on wants, and 20% on savings and debt repayment. If this plan isn’t realistic, other options include a 70/20/10 or 60/20/20 plan.

3. Track your spending

Before creating a budget, though, you have to track your spending. This helps increase your financial awareness and mindfulness. When you’re consciously aware of your spending, you become more thoughtful about your purchases, which can lead to more responsible and informed decisions. Moreover, tracking your expenses is empowering because it can give you a sense of control over your money, allowing you to prioritize your financial goals and reduce stress around money management.

Use a spending tracker app or spreadsheet to monitor your spending habits and identify areas where you can cut back. This will help you stay on top of your finances and avoid overspending.

4. Set financial goals

Setting financial goals is also crucial to achieving financial stability. Determine what you want to achieve financially, such as paying off debt, saving for a down payment on a house, or building an emergency fund. Set specific, measurable goals (SMART) and track your progress on a regular basis.

Here’s an example of how to set SMART goals:

Let’s say you want to save money for a down payment on a house in the next three years. To set a SMART goal, you could use the following framework:

• Specific: Instead of saying “I want to save money for a down payment,” be specific by setting a clear target amount. For example, “I want to save $20,000 for a down payment on a house.”
• Measurable: Break down your goal into smaller, measurable milestones. For example, “I want to save $555 per month for 36 months.”
• Achievable: Ensure your goal is achievable by reviewing your income and expenses to see if it’s realistic. If it’s not, you may need to adjust your timeline or target amount.
• Relevant: Ensure your goal is relevant to your overall priorities and values. For example, if you value homeownership and stability, this goal is relevant to you.
• Time-bound: Set a clear timeline for achieving your goal. In this example, the timeline is three years.

Putting it all together, your SMART goal might look like this: “I want to save $20,000 for a down payment on a house by saving $555 per month for the next 36 months.”

5. Automate your finances

Automating your finances can help you stay on track and avoid late fees and other penalties. Set up automatic bill payments and savings contributions to ensure that your financial obligations are met. Along with automating your savings, consider switching to a savings account with a higher rate, such as a high-yield savings. Rates are on the rise, and as of March 2023 many of these accounts offer 3% or 4% (much better than 0.01% with a regular savings). 

6. Review and adjust your plan regularly

Reviewing and adjusting your financial plan regularly is also important to ensure that you stay on track and hit your goals. So review your budget and spending habits and make adjustments as needed. You can’t set and forget your finances! Due to inflation and other increases in expenses you might have to reduce spending in one area to compensate for increased spending in another.