Creating an Organized Financial System

Wednesday, April 24 at 10:25 AM
Category: Personal Finance

With April being Financial Literacy Month and spring cleaning underway in many households, we thought it would be a good time to help you tackle the paperwork that piles up when managing your finances. Each month you have bills to pay, every year you a tax return to file, each purchase has a receipt to be sorted and major life events have important documents to be stored. Having an organized financial system instead of just throwing everything into a drawer or box can save time and reduce the stress of not being able to find something when you need it.

Creating a filing system
Most people end up using filing folders in a drawer to store their financial records. If you do not have an available drawer to use, then consider buying a plastic storage bin. Buy a box of folders and label them for each type of expense you normally have and for other types of records you plan to keep. Common expenses include: rent/mortgage, utilities, auto, insurance, family, employment, bank statements, retirement, medical, etc.

Once you have the files set up just fill them with your receipts, statements and other information. There is a good chance some of the folders will get quite bulky over time. When that happens, you can start a new one or better yet, toss out what you do not need. Read here for helpful information on what to toss and when.

Paying your monthly bills
There are two general rules that apply here:

  • Pay all bills before any late payment fees are charged.
  • Keep accurate records.

You will receive bills throughout the month and each bill will have a due date. These due dates will be different and spread throughout the month. Therefore, you should pay bills twice a month. Since some of the due dates will be the end of the month and you must count on a couple of days for mail. Consider the 10th and 25th of the month as bill paying days. Sticking to this schedule will make it simple and you will avoid late fees.

When a bill arrives in the mail, open it, take a quick look at it to make sure there is nothing unusual about it and put it in a file folder (the "to be paid" folder). On the two days each month you pay bills, simply take that file and pay the bills. That is also when you should look more carefully at each bill. That way, you will become more familiar with how you are spending your money and you can double check to make sure everything is accurate. After the bill is paid, you should write the date you paid it and the check number on the bill. You then just file the bill or statement in your file folder for that category.

Managing your checking account
Accurate financial records, especially with your checking account, are a must. You need to know how much money is in your account before you write checks and make charges with your debit card to avoid bouncing checks and getting overdraft charges. This means you have to record each check and debit card transaction. This sounds simple, but it is easy to forget an ATM withdrawal or write a check and forget to record it. Recording each withdrawal and check is simply a habit you must develop.

Reconcile your account each month. You may want to consider using personal finance software like Quicken or Microsoft Money. You can write checks with these programs and they make balancing your account easier. If you use this type of software, then do not forget to enter ATM transactions conducted and individual checks written.

The views of this article are for general information use only. Please contact and speak with a subject expert when specific advice is needed.

Tags: Budgeting, Cash Management, Financial Education
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