With day light savings behind us, we are fast approaching spring in a week. We need to wake up from the winter doldrums and take a refreshed approach to the year. This should include your finances. We all should make our personal financial life plan part of our spring cleaning plan.
An important part of keeping your personal finances in good shape and getting yourself out of debt is organizing your finances. With spring now upon us, spring cleaning is on a lot of people’s minds, but this concept can apply to more than just your home. It can be applied to your personal finances as well.
Fortunately, organizing your finances isn’t as difficult as it sounds. Once you have your budget, your paperwork and your bills in order, your personal finances will be easier to manage and you won’t find yourself juggling payments or questioning whether you will have enough money to tide you over until next payday. If you’re ready to start spring cleaning your finances, these steps will start you off on the right track.
Set up a filing system
Whether you stash your receipts and bills in folders or file them electronically in your computer, what’s important is that you keep all of the paperwork related to your personal finance together in a safe place.
Gather your credit card, phone, utility, insurance, mortgage, car loan and other payments you’re required to make on a monthly or yearly basis and organize them in whatever way works for you. Envelopes, folders, spreadsheets, computer software, phone apps are all great methods that work. Once you’ve organized your paperwork, keep them together in a safe place, like a filing cabinet, a desk drawer, or a folder on your desktop. So, when it’s time to pay your bills, everything you need will be right in front of you.
Create a cash flow document
Controlling your cash flow is a critical step in getting your finances in order, and it’s a skill you can learn with the help of a cash flow calculator.
Now that you have all your payment obligations in front of you, write down your monthly expenses which includes your debts, fixed and variable costs, and discretionary spending, and all your income sources, cutting back where necessary to ensure all your obligations are met.
Tracking your spending is a helpful way to take account of what you are actually spending each month, which will help you stay within your budget.
Reviewing your cash flow frequently is an often overlooked, but important, part of financial life planning. Our circumstances can change unexpectedly, and when this happens, go back to your cash flow document, and adjust where necessary. Having a cash flow document helps you gain better control of your money by accounting for where it all goes.
If you have tried to make a budget in the past, but it never seems to work very well, you can make an appointment with a non-profit credit counsellor a financial planner and they would be happy to help you put together a cash flow document so you can get your finances in order.
Set up money reminders
Once you know what bills you have to pay, you’ll be in a better position to stay on top of your payments. One way you can streamline and simplify the bill-paying process is to set up money reminders for yourself.
Make a checklist for all the bills you are expecting and make a note of all your payment dates. Once you’ve itemized your billing dates, use an agenda, a wall calendar, your smartphone’s calendar alerts, a smartphone app, Google Calendar notifications, or a desktop calendar to set up an alert to remind you of an upcoming bill payment.
Whichever method you use, it will serve the same function: it will help you remember where your money needs to go, and when.
Automating your bill payments is another way you can streamline the bill-paying process. You can set up automated transfers and payments through your online banking, which ensures that you’ll never miss a payment.
Balance payments paydays
If you find that one payday seems to have more financial obligations than another, spacing out your bill payments can help you feel more in control of your finances. You can talk to your credit card company, lender, or utility company to change your billing cycle, so you can make all your payments without struggling financially for part of the month.
Having enough money in between paydays is important because it will prevent you from reaching for your credit cards to tide you over until the next paycheque.
Pay off your debt
Having debt payments on top of mortgage, utility and other necessities is an added financial strain that can throw your finances into disarray if you don’t keep up with your payments and stick to your budget. So, plan to tackle your debt now.
Evaluate how much you owe, and how much you are paying in interest. This handy financial calculator can help you determine how much you’re paying in interest, and how long it’ll take for you to pay off your debts if you’re only making the minimum payments.
To get a lower interest rate, you can consider refinancing your mortgage, asking your lenders for a lower interest rate, or consolidating your debts. With a lower interest rate, you’ll be paying more off your principle. We also have more tips on how to get lower interest rates along with tried and true methods on how to pay down your debt faster and save a lot of money.
Once you know how much debt you have and how much interest you have to pay, you can set up a plan to chip away at your debts. If you’ve consolidated your debts, you’ll only have one payment to make each month, which simplifies things. If you have multiple debts, there are different approaches you can use.
The “avalanche” approach focuses on paying off debt with the highest interest rate. Once you eliminate the balance with the highest interest rate, you move on to the balance with the next highest interest rate, and so on. The “snowball” approach involves tackling your smallest balance first, then moving on to the next smallest balance until everything is paid off.
Whichever method you choose, it’s important that you keep the momentum and reward yourself with each debt milestone you’ve conquered.
Start saving money
Squirrelling money away not only gives us peace of mind, but it also ensures that we’ll have something to fall back on in a financial pinch. Financial emergencies such as a job loss, reduced hours, an illness, major vehicle or home repairs can strike at anytime, and during these moments, having cash on hand can prevent us from resorting to credit and racking up debt.
How much you allocate towards your savings is up to you. You can start with as little as $10 per paycheque but what’s important is that you keep it systematic. The amount will grow with time, and the more savings you have, the less likely you are to resort to credit.
Organizing your finances is an important part of getting you back on the right financial track, but when responsibilities pile up and life gets busy, we tend to forget to organize finances and we let them slip by the wayside. This happens to the best of us, so if your financial house isn’t in order, don’t get discouraged.
I’ve always find found that by scheduling our life affairs, the things we need to regularly tend to, can create a dedicated time to do just that. It then becomes a specific goal and not just a want to do. Just as you spring clean your house, spring cleaning your finances helps keep your life, and your finances, organized. Believe it or not, when completed, you will notice a definite financial benefit Keeping Life Current.