If your finances are feeling a bit messy and out of control, it may be time to simplify and declutter. The following tips can help you organize your financial life.
#1 – Organize your files and accounts.
Start by gathering all your financial information, and establish an organized filing system to track your statements and accounts. For paper statements, you may want to organize paper documents within binders or use a filing cabinet with separate hanging folders for each account. Store these documents in a secure location.
It’s also important to organize and maintain electronic financial documents. If your financial advisor or financial software application offers an online vault, this can be a great place to store electronic files. If not, consider saving them in a secured cloud or on an external storage drive. Make a point to back up your files on a regular basis.
#2 – Establish a budget.
Once you have organized your financial documents and accounts, take time to understand the current status of your finances. Using the statements you collected, make a list of all your expenses over the last few months. Consider what you spend on rent or mortgage, credit card payments, monthly subscriptions, bills and utilities, entertainment and eating out, insurance, vacations, etc.
Once you understand how much money you are currently spending, compare that amount to the net income you bring in. Are you spending less than you earn? If so, are you saving at a level that will allow you to achieve your future financial goals? If not, you may need to cut back on some of your discretionary spending. For example, you may decide to cancel some monthly subscriptions, reduce the number of times you eat out each week or vacation closer to home.
Use the insights you have gained to establish a monthly budget to guide your spending and saving. There are some great software programs that can help you stay on track.
#3 – Automate.
One of the best ways to declutter your financial life is by automating as much as possible. The more you simplify, the more likely you are to remain on track toward your goals.
Consider automating the following financial functions:
- Establish direct transfers from your paycheck to your savings account and/or a 529 college savings account.
- Fund your employer-sponsored retirement account through automatic payroll deferrals.
- Establish automatic debits with your credit card company, loan servicer and utilities providers. Regularly check in on the payments to ensure they are correct.
- Set up bill pay with your bank to pay service providers that do not offer automatic debit capabilities.
#4 – Document your financial goals.
Take time to articulate and document your short- and long-term financial goals. Your financial advisor can help you incorporate these goals into a comprehensive financial plan to help guide your financial actions and make sure all your various financial strategies are working together to help you achieve your goals. Schedule regular check-ins with your advisor to review progress toward your goals and make any necessary updates to your financial plan as your life and situation evolve over time.
Could you use some help decluttering your financial life? We would love to have a conversation. To learn more, please contact us.
