How To Organize Your Finances (1)

By Wendy Mihm | April 7, 2011

The question of how to organize finances comes up most frequently at tax time.

So it seems timely to take on this subject now, since it’s April, tax time, and the time of year when many of us get smacked upside the head with the spring-cleaning bug.  If you also happen to be 8-and-a-half months pregnant, you may find yourself cleaning the crevices of the dryer lid with a Q-tip.  But that’s a whole separate post…

Anyway, the key to success in organizing finances is to find a system that works for you and your family’s actual lifestyle—not the one you wished you lived.  So if you’re a techie, you might want to rely on the new systems and apps like AboutOne and MoneyStrands to manage your finances electronically or on the go. But if you’re more traditional, which is completely fine, you should develop a paper system that suits your real lifestyle.

Regardless of which way you lean, here are some keys to success in answering the question of how to organize finances to suit your family’s busy lifestyle.

Manage The Paper That Comes In

• Consider eliminating all those zillions of credit card offers before they even arrive by using OptOutPrescreen.com.  This service allows you to opt out of credit card offers in chunks of 5 years.  So if you think you won’t want to add a major credit card to your mix in the next 5 years, this is a great way to stem the tide.

• When you bring in the mail, literally stand over the recycle bin when you open it. Open. Toss. Open. Toss. That way it has no time to pile up and confuse matters.

• Automate whatever you can, as in, get direct deposit and opt for e-bills if that will make things easier for you to track. But if that will only serve to confuse you, don’t do it.

• If you are a paper bill person (I am for certain things) designate and use one place to put the bills every time, immediately.  I have one of those wooden bill holders with 31 slots in it, with each of the days of the month painted on each slot. When a bill comes in, I open it, read the date it’s due, write the due date clearly on the envelope and place it in the appropriate date slot.  I visit the bill holder about 3x per month and polish everything off.

Know Which Financial Documents to Keep and For How Long

With regard to financial documents, I am a big believer that much of what you need, you probably already have access to electronically. All of your bank statements are accessible online, all your credit card statements and mortgage payments are too.  Then you can create a folder for all the little receipts you need to keep throughout the year for tax purposes.

But what about keeping copies of other important financial records? What about copies of your mortgage documents, 401K statements or charitable contributions? How long do you keep them and where?  Bankrate.com has a great table that summarizes how long to keep many of the most common important financial documents and why.  The question is where?  If you have plenty of storage space and are comfortable with filing each of these once a quarter by the categories in the Bankrate table, that might be a good way to go, as long as the categories make sense to you. Another way might be to consider electronic storage, which you could also tackle once a quarter.

Consider Electronic Storage for Critical and Sentimental Items

There are certain items you may need to access at a moment’s notice.  If certain family members have medical conditions that call for quick access to medical records or insurance forms, you really should consider an electronic storage system like the super cool one at AboutOne. By way of full disclosure, I am particularly fond of AboutOne’s system and have become their online partner and resident Personal Finance Expert in the AboutOne blogs because I gave their system a test drive myself and found it incredibly easy to use.  There was no confusing manual or long download instructions—you just jump in and start using it to store your files and photos.

Since prices on these online file storage services have come down considerably and the applications are so user-friendly now, you may also want to consider a service like AboutOne’s just for sanity’s sake.  Your kids produce masterpieces by the dozen, but your refrigerator is only so big. Why not scan and store them electronically, so you can liberate your fridge but still capture the artwork for all time?

Remember, which organizational method you choose is not as important as whether it works for you and whether you get started organizing your finances at all.

Once you get organized and stay consistent in managing what comes in, and storing it in a place that makes sense to you, you will start to feel much more in control of your financial destiny. And that’s a huge step toward living a happy, healthy financial life.

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