Over the course of a year, you create so many documents it's important to stay organized. You will typically have: a monthly account statement for every account listed above, a monthly bill for every utility you have, copies of your tax return, insurance statements, and more. Some of these items you can toss after just a short period of time. Most bills you can toss after a year. However, some items you need to keep for a long time. For example, the IRS recommends you keep your tax returns for at least three years, but it really makes sense to keep them forever.
To make things easy on myself, I use the Home File System :. As you can see, the system provides tabs for all of the major categories that you will ever need to keep, along with guidance about what should go where, and a Quick-Find index up front. Inside each tab, you make a manilla folder for each individual account. For example, one of the first tabs in "Auto", and you can see a manilla folder for one of our cars- Honda Civic.
Inside each tab you can keep a copy of your registration, insurance, and any service records. That way, everything you need for resale or trade-in is filed in one spot. The same applies to banking, investing files, even pay stubs from your "Employment" which you can see almost dead-center in the picture. I then make it a habit, once a year in January, to go through and purge out any old items that I don't need anymore. This is the best way I've found to stay financially organized.
What systems and tools do you use to stay financially organized? Robert Farrington is America's Millennial Money Expert, and the founder of The College Investor , a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here. One of his favorite tools is Personal Capital , which enables him to manage his finances in just minutes each month.
Best of all - it's free! He is also diversifying his investment portfolio by adding a little bit of real estate. But not rental homes, because he doesn't want a second job, it's diversified small investments in a mix of properties through Fundrise. Worth a look if you're looking for a low dollar way to invest in real estate.
Great ideas, Robert, but who pays bills any more? Is there some set of bills that you prefer to look at and pay deliberately? I actually keep very few bills on autopay — only the ones that stay the same each month like my mortgage. Otherwise, I do look at them and pay them deliberately. So, I look at my utility bills, credit card bills, and medical ones. What are you trying to do? I recommend Dropbox or Evernote. You can also use a tool like FidSafe. Is the Home File pretty big? Or do you scan most things and keep them in a digital file?
Also, I use a Mac. It sounds like you would not recommend Quicken for some reason? The HomeFile is as big or small as you want it to be — you can choose what tabs you decide to use.
Just keep the stuff I need to keep papers for at this point. I like Quicken more as of , but the Mac version is still sadly not as robust as the PC version — especially for investments. Read our Quicken review here.
1. Be wary of well-meaning advice
Your email address will not be published. Keeping Your Financial Accounts Organized The first step in getting your financial life organized is simply listing out your financial accounts.
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- 2. Categorize your expenses;
The three ways to go about it are pretty straightforward: The Spreadsheet or List Method This is the traditional way to keep track of everything. The Software Method This has been the cornerstone of financial organization for the last 10 years - using software to keep track of all of your accounts. However, there are alternatives, like iBank which works for Mac.
The Online Method Over the last five years, online services to help you keep track of your accounts are really becoming popular. Tracking Your Bills And Other Documents Alright, now that you have all of your account balances in one place, what the heck do you do with all that financial mail you get? The next part of the equation is your expenses, which fall into three categories: fixed committed expenses, variable committed expenses and discretionary expenses. This can play havoc with any budget.
If you qualify for a debt management program , you may be able to reduce your monthly debt payments as well. The goal in budgeting is to make sure your expenses do not exceed your income. If they do, and more money is going out than is coming in, then you need to make adjustments.
If you make any payments by check, your checkbook register can help you keep track of incoming and outgoing money, and what you spend money on. Although paying by check is becoming rarer, those who stick to this payment method should keep their checkbooks balanced. This will help you avoid overdraft fees or bounced checks, and it can shed some light on your spending habits. Make adjustments, but always balance inflows with outflows. Once you work out all the kinks in your budget, you need to commit to following it. No budget is forever, however, so periodic reviews are key to success.
If you get a promotion, for example, you can increase your discretionary spending as well as your savings goals.
On the other hand, a layoff or fewer work hours could mean cutting back on spending until you restore your income. Savings should be part of the plan. Financial planners recommend that your savings cover six months of income, enough to compensate for a job loss or other emergency. You might find it useful to open a separate savings account and fund it gradually until you reach the goal.
Keeping a separate account will make it more difficult to raid the emergency fund to cover non-essentials. Creating a budget is a great step in working toward a more financially sound future for you and your family. Committing to your budget will get you there. Budgeting is all about balance. As mentioned, an emergency fund is crucial to financial security. Experts recommend looking at your withholding taxes to find hidden cash. If you receive a large refund every year, perhaps you need to change your filing status to receive additional money in your paycheck to put toward an emergency fund.
Unless, that is, you are putting your tax return funds into that fund.
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Medical crises in particular can turn a balanced budget upside down. Negotiate large medical expenses, such as an emergency hospital stay, with the hospital. Almost all hospitals negotiate fees. If not, a medical bill consolidation may help, as it allows you to combine all your medical bills into one lower monthly bill through an agency or a bank loan.
This not only makes it easier on you, but the arrangement protects your credit score because you are able to make on-time payments. The downside is it may take you longer to pay your debt in full. Everyone can benefit from taking a pronounced and proactive approach to control their finances. Committing to your budget will help guide you into a much better financial position.
Creating a budget is the first step, but maintaining the budget is where you start to see real growth in yourself and more stretch in your dollar.
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Staying motivated can help alleviate some of the pressures of budgeting. Consider setting aside some money each month so you can look forward to a relaxing vacation at the end of the year. Finally, set realistic goals. Start slowly, building up to a plan that works for you and your lifestyle. How do you separate wants from needs and why bother? For many of us, knowing where to draw the line can mean the difference between creating a successful budget and going broke.
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