Financial New Year's Resolution: Organize Your Finances

Resolutions-Part-2 Welcome to part two of our financial New Year's resolutions series! If you missed yesterday's post with the free worksheet for determining your financial resolutions you can check it out here. Onto part two: Getting Your Finances Organized!

Start off your new year on the best financial foot by organizing your finances. This simple and sometimes overlooked goal is important for your finances and the success of your resolutions because once it’s done you can quickly and easily assess your financial situation.

Here are a few steps you can take to ensure that you’re financially organized.

Step 1) Create a filing system

We recommend you have different files for the following areas:

  • Health
  • Job
  • Banking
  • Credit Cards
  • Taxes
  • Investments
  • Home
  • Automobiles
  • Insurance
  • Major Purchases
  • Other Loans

This is your filing system, so find the groupings that makes the most sense for you. This filing system can be on your computer, a secure cloud service, or using hard copies from your accounts. You just need to find a secure system for organizing your finances that you can (and will) utilize.

Within these separate folders, we suggest you file your documents in chronological order so you can easily go back at a later date to find information, like your 401(k) statement from October 2014. Once you have your system decided, make it a point every month to get all the appropriate information into the correct folders.

Wela is a great tool to get all of your finances in one, easy to access place. Link all of your accounts and Wela shows you your net worth as well as the breakdown of each account.

Step 2) Clean up your checking, saving, investment, retirement, etc. accounts

Review all the accounts where you’ve squirreled away money over the past few years. If you’ve changed jobs in the past few years you might have a few different retirement accounts, or perhaps you opened a new savings account with your holiday bonus last year because the interest rate at that bank was good at the time. Regardless of why you originally opened an account, look at the account with fresh eyes to determine if you still need to keep it open today. Having multiple accounts across a wide variety of financial institutions can make it difficult to keep track of your money and may not be optimal for growth.

Related: Ashley Asks A Question: What is a 401(k) rollover, and is it bad if I don’t?

Once you have your accounts organized how you prefer, take some time to work with the institution to ensure they have your most up-to-date contact information and that they’re communicating with you in a way that works with your filing system. Most financial institutions today allow you to choose between physical and/or digital statements as well as how often you receive them. Be sure they’re not sending your bank statements to an email address you haven’t looked at in three years.

Step 3) Optimize your recurring bill payments

Most banks now offer the technology to schedule recurring bill payments so you don’t have to worry about getting hit with any pesky late-payment charges. Take some time at the beginning of this year to pre-schedule as many of your recurring bills as possible. Timely payments of your bills will help improve your credit score and help you avoid late charges. You can even earn some extra points or cash if you’re able to set up recurring bill payments using your credit card. Just be sure to pay off your card in full each month.

This can also be a good time to look through your monthly  charges to determine if there are any services that you want to remove for the year. If you’re watching Netflix six nights out of seven, do you really need to be paying that large monthly cable bill?

Related:10 Easy Money Hacks

Step 4) Plan for your irregular bills

Hopefully you don’t have surprise bills show up, but there are some bills like new tires or a dentist bill that you most likely won’t schedule  in advance. For these bills, have a plan of action for how you’ll handle the bill once it hits your hands. There are a few options for this:

  • Pay the bill as soon as you have it.
  • Set aside 30 minutes a week to review and pay all bills that you’ve received the week prior.
  • Keep your unpaid bills in a prominent place in your house so you can’t forget about it, and have a system to know what needs to be paid by when.

The important part of this is to avoid taking on any late charges. You never want to pay more for a service than the original agreed upon price.

Step 5) Put tracking in place

There are many free online services like Wela which can help you with tracking your spending, savings, net worth, and goals. These programs typically pull in your financial information and then relates it back to you in an easy-to-understand format, such as how much you spend on food and entertainment versus housing each month. If you prefer to kick it old school, though, there are a variety of Excel templates you can use for tracking your finances. By putting this tracking in place now you’ll be able to better understand your financial habits (both good and bad) in the future. Being more informed on these things gives you the power to improve them later.

Organizing your finances is an important step when growing your wealth. It can take some time to set up, so we recommend giving yourself a realistic but reasonable deadline. You shouldn’t need until December 31st of next year to get this done, but you’ll most likely need more than thirty minutes to get this all done.

Suggested New Years Resolution:

I will set up and implement my financial filing system using _____(method)_____  by _____(date)_____. I will update my files on the  _____(day)_____ of each month. I will work with my _____(number)­­­_____ financial institutions to update my information and optimize my automated bills by _____(date)_____. I will put my financial tracking in place by _____(date)_____ and moving forward will review my progress when also updating my files.

Read Financial New Year's Resolutions Part 1