Organizing Your Finances Will Help You Save Money Over the Long-Term

Every year, families every where participate in what is known as “spring cleaning”. We clean out closets and drawers of clutter that built up throughout the winter months. We exchange curtains, bedspreads and get into corners and ceilings for the detailed cleaning that is often neglected on a daily basis because we’re just too busy to do it all!

What most of us don’t do on any sort of regular schedule is a clean-up of our finances. Your financial situation could use a regular tune-up and organization just like your home. Organizing your finances will help you save money. Here are some tips for organizing your finances:

Get it All Together: take some time to find all of your financial statements for all bank accounts, credit cards, investments, health insurance, life insurance, and any legal documents you have. If you don’t already have a good filing system, now is a good time to file your important documents in a fireproof box, in an orderly fashion. While you’re filing, you should take the time to find any other documents you save, like social security cards, birth certificates, marriage and/or divorce certificate, property and vehicle papers, etc.

Determine Your Net Worth: go through each of your statements and determine what your net worth is. Your net worth shows you how much you own (your assets) and how much you owe (your liabilities). If you owe more than you own, you have a negative net worth and you should take a look at methods for improving this financial situation as soon as possible.

Look at Your Cash Flow: are you spending money like water? Look at your bank statements to see how often you swipe your debit card for unnecessary expenses, or how often you take cash withdrawals for the ATM. Look at how much money you’re saving and/or investing versus how much is being spent frivolously and look at areas to improve your cash flow.

Create Financial Goals: most people have short term financial goals for paying off credit card debts and small loans, or saving for a car down payment, or preparing for a family vacation. Most people also set long term financial goals, like saving for a down payment on a home or to buy a home with cash; or saving for their retirement. Figure out what your financial goals are, organize them by length of time you plan to achieve each goal, and write them down so that you can prioritize and work towards achieving them.

Set Up a Financial Plan: sometimes referred to as the dreaded “B” word (budget), a financial plan is the only way you will actually reach the financial goals you’ve set. You need to decide how to allocate your income to meet your goals. As you start planning how to divide up your money, you may find you need to make adjustments to your goals, or go back to the cash flow planning process and find ways to reduce your expenses to free up more of your income for reaching your financial goals.

As you are organizing your finances, this is also a good time to get a copy of your credit report and order your credit score to see how you are doing. It’s how lenders see your financial situation. If there are errors on your report, take steps to fix them as a lower credit score or financial problems on a credit report will limit or prevent your access to credit.