What is the best way to organize your finances? A financial organization is a great place to start when creating your money management routine. If your financial documents are a mess and you don’t have a system to ensure that you are paying your bills on time, your financial health may take a dive.
The method you choose to organize your finances does not need to be complex. A simple system works just as well as a fancy one. Do whatever motivates you to stay consistent.
Below are a few fairly simple tips that work well for me. Personally, I don’t like to spend hours maintaining my finance files. Simple and effective is my motto.
You can use these tips to create your system to organize your finances. Feel free to adjust them to your liking.
Tips to organize your finances
1. Have a system for your mail
Sort through all of your mail daily. It will take you 10 minutes tops.
Create a system for your physical mail.
Sort through your mail immediately. This is good for multiple reasons. For one thing, you won’t have a big intimidating pile of mail hanging around that you dread digging into. It’s also less likely you will forget to make a payment (because you did not see the bill in that huge pile of mail).
Toss out junk mail as well as credit card and loan offers. Shred if it makes you feel better. Honestly, do not read any of these offers. Just get rid of them. That will probably dump about 60% of your mail right there. Not only will you be left with only mail that needs to be addressed but you will also have more space on your table.
Open up all of the bills and put them in one pile. Order them by the due date. I like to keep the bills due first on top. Keep your bill pile somewhere handy so you can add future bills that arrive in the pile. I have a cute little box that I use but use whatever you like. There are many styles of bill holders you can purchase online.
Statements and other mail related to finances can be put in another pile or section of your box.
Create a system for your online financial mail
Treat online bills and those sent via email in a similar manner. Address them as you see them.
I’ve tried different methods, but what works best for me is to print the first page of the email, note the date due, and add it to the appropriate place in my bill pile. Since I have both paper and online bills it is just easier for me to sort through one pile when it is time to set up my payments.
You can also create a separate folder in your email for bills that need to be paid. Move the online bills to the appropriate folder. This works if you don’t have many paper bills and you like to work out of your email.
2. Schedule your bill pay sessions
Make an appointment with yourself to pay your bills. If you use a calendar reminder, create a recurring event.
The frequency of sessions depends on your situation.
One system might be to review a few days before each paycheck. This can be especially helpful if you are living paycheck to paycheck.
For example, if you are paid on the 15th and the 30th of each month, then set a recurring event to review your bills on the 13th and the 28th. Doing this frequently takes less time per session and you are so much more on top of things. It also ensures that you are well aware of your financial picture.
When it is time to review your bills, set up payment schedules for all bills that are due prior to your next pay date.
For example, if you are reviewing on the 13th, assuming you will be paid on the 15th, then set up payments for all bills due the 15th-29th.
If you are reviewing on the 28th, set up payments for all bills due the 30th-14th.
When using online pay this is much easier because you can set your bills up to be paid on the date you assign. If you are paying by check then estimate the time it will take for the check to arrive and put it in the mail accordingly.
Whatever frequency you use for your bill pay sessions be sure to do it consistently.
3. Schedule your review for statements
Each month, check your statements and reconcile your accounts. Generally, your statements arrive around the first of the month.
It is up to you if you want to create a separate review or include it to one of your bill review dates. I reconcile my statements during my bill review date since it is only a few more steps and it gives me a really good picture of where I am financially for the month. It’s also the time I work on my budget.
4. Maintaining your documents
Document retention is part of a financial organization. You really do not need to keep all of your documents for a long period of time. If you have a business, keep everything for 7-10 years. Otherwise, one year for most things is fine.
My simple, boring, not fancy, but it works for me system
After I make my payment, I write the payment date on my bill statement and throw it in a 10×13 envelope.
Once I know the payment has cleared (when I do my bank reconciliation) I shred that bill.
Don’t worry, you really do not need it. I think the only time I have been asked to show a utility bill was when I applied for a library card and they wanted to confirm that I lived at the address I noted.
If it makes you nervous to toss the documents then keep them for a few months. I used to keep everything until I realized it just created more work. I had more files unnecessarily hogging closet space and I ended up literally shredding for days.
I’ve read that bank statements should be kept for one year, but I recommend three years especially if you have irregular income. You may need these if you are trying to qualify for a loan. If your bank stores your statements online, which most do, they will generally keep your records for 7-10 years, so that should cover you. Having a paper copy is a good idea though as a backup in case the bank system is down and you need that document right away.
Keep all tax documents and supporting data for ten years.
Other than that, there are not many other documents that you need to keep. Try to shred regularly so you don’t end up with a closet full of phone bill receipts.
Final words about how to organize your finances
You don’t need to go crazy to create a system for financial organization. Simple works just fine. If the system is too complex you may find that it is not worth your time to maintain it.
Sorting your mail daily, setting up bill pay appointments with yourself, and minimizing the amount of documentation you keep can all be very helpful steps for creating a simple financial organization system.
Here is a link to a simple checklist that can help get you started.
If you have any questions, comments, or ideas to share, please reach out.
Thanks for reading!
Stay balanced,
Jill