Whether you’re trying to get out of debt or plan to retire early, having your finances organized can help you better understand where your money comes from and where it goes.
Creating an organized system will also give you more control over your money and allow you to make decisions that are right for you and your personal goals, whether that means saving more or spending less.
here are seven ways to organize your finances and save money so that you can have more control over your personal finances.
1) Track your spending
The first step in organizing your finances is tracking your spending. You can do this by using an app like Mint or through a service like Personal Capital.
Using these will allow you to see where your money is going, find any mistakes, and identify areas where you might be able to cut back.
You can do that by establishing goals:
It’s important to have specific financial goals before making any changes. For example, if your goal is travel then it might make sense for you to save more than if your goal was paying off debt.
Establishing clear-cut goals will help you focus on what matters most to you. If the only way for you to get ahead financially is to start saving, then that’s what you should do right away.
The earlier you start saving the better because every year of not saving compounds and makes it harder to get ahead.
2) Set up a budget
Setting up a budget is the first step in organizing your finances. Creating a budget lets you know what you have available for spending, gives you more control over your spending habits, and will help you set financial goals.
To get started, determine how much money you make every month before taxes are taken out. Multiply this number by 12 to find your annual income.
Add any income from investments or other sources such as alimony or child support payments that come in on a regular basis. Next, decide on your monthly expenses.
Expenses include things like rent/mortgage, utilities (electricity, gas), car payment or insurance payments, groceries and personal care items (haircuts/manicures).
Don’t forget to factor in any debt payments you need to make each month. Once you have totaled all of these expenses, subtract them from your monthly income.
3) Automate your finances
In addition to being more convenient, automating your finances can also help you save money.
For instance, by setting up an automatic savings plan with your bank, you can build up a little emergency fund that will be there when the unexpected happens.
You’ll also be less tempted to spend on impulse if you know that the money is automatically going into an account for saving instead of spending.
While at that, to avoid overdraft fees, use overdraft protection:
If you’re not using your debit card enough to have a zero balance at the end of each day or week, it’s time to consider using overdraft protection from your bank.
With this protection in place, any transactions that exceed your available funds will be covered but only up to a certain point.
If you need to access more than this limit, you may incur an additional fee depending on the type of service your bank provides.
Plus, Be smart about how much debt you take out:
For some people taking out loans might seem like the best way to finance big ticket items such as homes or cars because they want access to those assets now rather than later.
4) Invest in yourself
Investing in yourself is one of the best ways to improve your finances, as it’s an investment that pays off.
There are a variety of ways you can invest in yourself, but there are a few key areas that everyone should consider: education, investing for retirement, and creating an emergency fund.
Education will always be important because employers want people who are constantly learning.
And while retirement may seem like something that’s too far away to worry about, the earlier you start planning for it, the more likely you’ll be able to live comfortably when you stop working.
Finally, having a rainy day fund will allow you peace of mind knowing that no matter what life throws at you whether it’s a surprise car expense or paying for unexpected medical bills your savings will help get through any rough patches
5) Live below your means
It is important that you live below your means. This means limiting how much you spend on what you don’t need. It might be difficult at first, but will pay off in the long run.
You can also use apps like Mint or You Need a Budget which help you. If you have money left over after paying bills, put it into an account called Savings so it can build up.
Once you start putting some money away for savings, it will feel good knowing you are taking care of yourself and saving for future needs.
I was able to get out of debt when I began living below my means and creating budgets because I had saved enough for a down payment on my house.
6) Get rid of debt
One of the easiest ways to get your finances in order is by getting rid of any debt you may have. It’s a difficult process, but it has a lot of benefits.
One of the most obvious is that you’ll be able to sleep better at night without worrying about how you’ll pay off the balance, plus you’ll be able to save more money for other things.
The process can take a long time, so make sure you’re prepared for the commitment.
Consider saving up an emergency fund in advance so that you don’t start dipping into those funds when you finally pay off all of your loans.
And remember: You don’t want to spend all this extra money once you’ve finished paying off your loans!
7) Have an emergency fund
Having an emergency fund is important because it will provide you with a safety net during unexpected times.
An emergency fund should be comprised of at least 6 months worth of living expenses.
This means if your monthly expenses are $4,000, then you should have $24,000 in your emergency fund.
You can start by putting away $100 each month until you have reached that goal.
If you’re trying to save for a car or home down payment, the same rule applies; save at least six months of funds for those purposes as well.
Utilize tax-advantaged accounts: If your employer offers a 401(k), try contributing enough so that you’re getting the full match from them.
