Living frugally involves being in control and planning your finances.
Sometimes, handling your finances may feel like a full-time job, especially if you already have a 9-5 job. In most cases, people don’t have the time to handle all the little money-management tasks.
Who has the time to track all the coupons and clippings or do DIY projects at home to cut costs? While some of these personal finance organization tasks often fall by the wayside, there are many ways you can plan yourself. You can organize your personal finances in ways that help you reduce costs and contribute positively to your personal financial health.
Read below to find out how to create a budget, track your monthly spending, and set your financial goals:
Table of Contents
1. Start by Finding Out Your Net Worth
Are you wondering how to organize your personal finances? Start by calculating your net worth. This is the total amount of money you have in terms of assets minus all your liabilities.
Your total net worth will say a lot about your current financial health and help you adequately plan your future. Your actual net worth is the amount of money you would get if you sold everything you have and paid off any debts. The best way to do this is by taking a hard look at everything you own and being honest with yourself about all your debts, including unpaid credit cards, car loans, and mortgages.
After determining your net worth, you can now work backward and create a feasible budget, track your personal spending, and set the right financial goals. This is the only way to take control of all your finances. Below are some of the items that are considered assets:
- Investments such as bonds, stocks, real estate accounts, and securities
- Your vehicles
- Real estate properties and equity
- Cash in both checking and savings accounts
- Art pieces and collectors’ items
- Valuables such as jewelry
After determining your net worth, it’s essential to know your liabilities. Items that should be considered liabilities include debt, credit cards, your student loan balance, car loan, and mortgage balance. Then add up the total value of your liabilities and the value of your assets.
To get the total value of your net worth, ensure you subtract the value of the liabilities from the total value of your assets. However, keep in mind that your net worth is likely to change every year or after a significant change in your finances.
Calculating your net worth is challenging, and you might be tempted to skip this step. However, it’s the most important part of organizing your finances.
2. Set Feasible Financial Goals
Setting your financial goals is essential if you want to get your finances in order. What do you hope to accomplish financially? Are you thinking about saving some money for retirement, your child’s college education, a vacation, or a new car or home?
Do you want to complete paying all your debts or create an emergency fund for your household? Then you should consider setting your financial goals, both short-term and long-term.
Put your goals on paper and think about how you will reach them. A personal financial plan will help you prepare for your next significant expense with minimal worry. Setting your financial goals is like planting seeds for your financial future; soon, you will be reaping the rewards of these seeds.
3. Create a Filing System for Your Finances
Filing can be pretty challenging, especially for personal finances. Whether you write down your bills in a notebook or stash your bill payments in folders, it’s essential to keep all the information related to your finances in one place. You should also consider filing your finances using electronic devices such as a computer or a smartphone.
Gather all your utility, mortgage, credit cards, phone, insurance, and car loan payments. You should also track all your annual and monthly expenses and adequately organize them in ways that best work for you. You can use envelopes, spreadsheets, folders, phone applications, and computer software are a great way to organize your finances.
After gathering all your finances, ensure you organize your paperwork and safely store them in a filing cabinet. This helps you when you need to pay your bills as everything you need will be right there.
4. Track Your Monthly and Annual Spending
Do you live check to check, and you’re not sure how much you spend every month? To organize your personal finance, you should start by tracking how much you spend each month. You can do this by poring over your past few months’ bank statements.
Looking at your past spending will help you better understand where you spend your money, helping you paint a clear picture of where your money goes. Check whether you’re spending too much money on incidentals such as vending machine snacks and coffee.
Are you falling deeper into debt and spending more money than you make? Or are you falling short on your financial goals, such as saving or purchasing an investment? When tracking your finances, you will realize that the small items could add up really fast.
Before the month ends, you should track all your spending and find out where your money goes. This helps you pinpoint areas that you might need to cut back.
5. Create a Budget
You can’t organize your finances without creating a budget. After determining your net worth, establishing your financial goals, and tracking your annual spending, it’s time to develop your budget.
Your budget should be a direct reflection of how you’d like to spend your money. The best way to create an adequate budget is through a worksheet. Here, you will gather and record all your financial statements and income sources. You should also document your monthly expenses and adjust the expenses as time changes.
You should also learn how to budget your yearly spending and break everything to create a monthly spending plan. You can plan your budget by using an online budget planner. Check out this page for the best budget planner.
6. Adjust Your Financial Habits
After taking all the above steps, you’re now ready to complete your monthly budget. After documenting all your spending and income, it will be easier to see how to cut costs and save more.
The first step is to look at your “want-to-have” expenses. Check whether you can consider eating a home-cooked meal instead of eating out. Or can you watch a movie at home instead of going to the theater?
Look for a way to adjust all the money you have tracked in the past month to see how much you can free up. After adjusting the spending on some of the wants, it’s time to check on your needs.
While you may need internet at home, do you need the most expensive option available on the market? Can you use the cheapest available one at a lower speed to make it more affordable?
The last step here is to check your fixed expenses and find a way to adjust them. Doing this will be more challenging and you may require a lot of discipline. However, with a closer inspection, you may find out that a need is just something you find hard to part with, you may not require it to live comfortably.
Making a decision to do away with some of your needs will require a big trade-off. Therefore, it’s essential to weigh all your options. The amount of money you save on these expenses may be little but with time it will slowly add up.
7. Automate Your Bill Payments and Set Up Reminders
One of the greatest personal finance organization tips is to automate your bill payments or set up reminders. However, you need to know what bills you will be paying so that you can stay on top of the payments. Bill payment automation also helps you simplify and streamline the process of bill repayments.
Create a checklist for all the bills you will be paying for that month and the date of payment. After itemizing your billing dates, you can use a Google Calendar notification, a phone app, a wall calendar, or an agenda to set up an alert to help you remember upcoming bill payments. Ensure you choose the method that you’re most comfortable with.
No matter which tool you choose, it will serve the same purpose; you will easily remember where your money is needed and when. You can also automate bill payments by setting up automated payments and transfers using your online banking application. This helps you avoid late payments and the resulting fines.
Are You Ready to Use the Above Personal Finance Organization Tips?
Personal finance organization isn’t an easy process. It requires discipline, patience, and a lot of hard work. You need to track your income, create a budget, use personal finance organization tools, and adjust some of your spending habits to reach your financial goals. However, following the above tips will make the process easier and more seamless.
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