By: K.H. Smith
There are so many ways to organize your finances and different ways work for different people. If you are looking for a system that will work for you, maybe I can help. In order to find your system, you need to know how much time you are going to spend on it and how much technology you are comfortable with. If you tend to check your accounts regularly (daily or every other day) you can use debit or credit cards since you are tracking your spending regularly and are less likely to go overboard without knowing it. If you hate checking your accounts (which you should do at least weekly) it may be better to use cash. You are less likely to overspend if you have cash and there shouldn’t be surprises if you are only spending what you have. Of course, you can always do a combination of both cash and credit.
Track Your Accounts
I use Mint to track my spending and monitor my accounts. It is a free app/website that tracks your accounts. It doesn’t have access to move money from your accounts, it just tracks balances and such. I have used it for about 8 years without any issues. I like that I can track multiple banks from the same site. Mint helps me create goals and tracks my progress. It also helps me with the budget feature. Even though I haven’t used that feature consistently, I like that it is there.
I have also just used a simple Excel spreadsheet to plan for future purchases and help me plan my debt payoffs. I like using Excel since some months have variables in income and that helps me know how much I plan on saving vs. debt payoff each month. Excel is a little more hands on since you have to update your own balances etc. But it has worked well for me and I am no Excel expert.
Use Separate Accounts
I have 2 checking accounts and 5 savings accounts! My husband also has a checking and savings account that is separate. It seems like a lot, but for us, it helps keep our finances more organized. I have my main checking account where paychecks are deposited and bills are paid. Then my second checking account I use for things like a gym membership that requires a bank account or PayPal. I don’t want to allow them access to my main account, so I use my side account for that.
My 5 savings accounts are broken into a joint account with my son, so essentially his savings account, one for my emergency fund (it has about 4 months’ worth of expenses saved right now), two for expected expenses (link) like our new car and septic field, a rainy day fund that is less accessible for some amazing vacation someday. I like knowing that I have X amount saved for this vs that and knowing that my emergency fund won’t be accidently dipped into by expected expenses.
My husband’s accounts are for his rental property and let us keep those expenses separate. These accounts are all free, so there are no added fees. This may be too many accounts for you or too few depending on your needs. The important part is to have enough accounts that work for you and your needs and be able to keep up with them.
Use Automatic Payments
I have most of my bills on automatic payment, so I check my accounts regularly to ensure that the money is being deposited and the payments are made. With auto payments because I never have a late fee and I am not paying for stamps and checks as often. I don’t have any fees from my credit union to do this so it works for me. I also have scheduled different bills to be paid at different times of the month so that one paycheck is not crushed with all the bills. You must change the due dates with your creditors before changing your pay date on your payment or you will be late and charged fees!! These automatic payments are easily tracked in Mint.
Credit cards can be a necessary evil in this financial world. They are convenient to use and allow you to rent cars, hotel rooms, and such without big deposits. Some even have great rewards. The obvious drawback is if you spend more than you can pay off in a month, you will be charged interest on your purchases. In essence, paying for your purchases in installments and eventually paying more than they are worth. My husband and I use 1 credit card for the cash rewards. It is paid off each month so no additional charges. Use credit cautiously.
My credit card has been open for 26 years, so that also helps my credit score. The longer an account is open the better it looks on your credit! I don’t apply for random store credit cards, unless I make a significant purchase and the savings is well worth the ding to my credit. And I only do this if I can pay it off without finance charges. I have done this 3x in my life for a savings of nearly $3000. Be very cautious with this!
I don’t apply for random store credit cards, unless I make a significant purchase and the introductory savings is well worth the ding to my credit. I also only do this if I can pay it off without finance charges. Be very cautious with this as well. It is easy to forget about it and end up with a large finance charge as these cards usually have high-interest rates and fees! However, when used judiciously, it can be a huge money saver. I have done this 3x in my life for a savings of nearly $3000.
Consider a Line of Credit on Checking Accounts
I have a line of credit on my checking account for emergencies. I have this line of credit just in case I have some bill come through my checking account that I forgot about or something. It prevents me from bouncing a check or payment. I am careful to not use it because it is treated as a cash advance which has a high-interest rate that compounds daily. However, it is not a substitute for an actual emergency fund. I tend to keep my savings out of my checking account and in savings accounts so they can earn interest, so my checking account balance sometimes gets low. That is the reason for the line of credit. I think I have used it 2x in the past 4 years, but it is a safety net for me.
These are just a few options on how to organize your finances. Find a system you are comfortable with and make it work for you. You will never regret organizing your finances. It is a great first step towards financial success!
What are some tips you have for organizing your finances?