How to Organize Your Personal Finances
Here is one way that will help you understand how to organize all of your finances.
Begin by gathering all of the statements, bills and other paperwork that might be sitting on your desk. Get it all together so that you can begin going through all of it. This may seem overwhelming at first, but once you set up your method of organization, it will go quickly.
Now, you should buy a file cabinet or a small filing bin. Purchase one that allows you to use hanging folders. Then, pick up some manila folders to put in these filing folders. Make sure you have at least 10 hanging folders and enough manila folders to cover all of your accounts.
Label your hanging folders with the following categories:
Credit Card Debt
Insurance
Loans
Utilities
Housing
Investments
Retirement
Tax Information
Credit Reports
Now, it is time to sort this out. Each of these folders will contain manila envelopes as follows:
Credit Card Debt – make one manila folder per credit card. Hopefully you have been diligent in paying your credit card debt down, but if not you will want to label your each credit card name in RED pen. This will make them stand out, and will remind you to take care of this bill as soon as possible. The danger of credit card debt is a whole other topic! Now, with each folder having a credit card name on it, place any related statements into these folders. You now should have a place for each piece of credit card related mail. Keep only the essential things, privacy statements, rate increases and monthly statements to keep the file nice and tidy.
Insurance – In this hanging file you should include manila folders labeled: home/renter’s insurance, car insurance, life insurance, medical insurance, and dental insurance. Place statements, bills or policy paperwork into the appropriate folders. This will likely be a hefty sized folder since many insurance companies send lengthy policy notices.
Loans – This hanging file will include such items as student loans, car loans, personal loans or other loans you might owe. It should not include your mortgage loan, as this is included in the housing file. If you have decided to have loan payments directly deposited from your bank account, place this paperwork in the files also as it will help if you need to go back to change the amount.
Utilities – This hanging file is pretty basic. It will include utility bills such as water, energy, heat and sewage. In this folder you should also include items like cable, internet and phone. This will be the folder in which you keep everything related to running your apartment/home.
Housing – This is the folder to use for your mortgage loan, or any paperwork you may have regarding an apartment you are leasing. Be sure to put your lease paperwork, including the lease you signed in this folder. It will be easily accessible if there is a problem with your apartment. If you own a home this is a good place to put a folder for repairs or remodeling. If you keep track of your expenses you may be able to use this information for tax purposes when you sell your home.
Investments – This folder should contain information about any checking, savings or investment accounts you may own. You should make a separate manila folder for each bank account you have, and each separate investment. Be sure to place bank statements in these folders monthly.
Retirement – Any information you have for a 401K, IRA or other retirement documents should be in this folder. If you have more than one retirement plan, be sure to make a separate folder for each of these as well.
Tax Information – Keeping your tax returns from year to year is essential. Label folders starting with the most recent tax year all the way back to when you first began filing taxes. Give each year it’s own folder to keep things nicely organized. You should make a folder for tax deductible receipts as well. This will come in handy when it is time to do your taxes and itemize your deductions.
Credit Reports – The Fair Credit Reporting Act now mandates that you can receive free credit reports, up to 3 per year. Check out this site: http://www.ftc.gov/bcp/conline/pubs/credit/freereports.htm You should run this regularly and keep them on file. This is something that you can refer back to as well to see how your credit is improving.
So that is it! That is how easy it is to organize your personal finances. Now, the key is to manage them. When you pay your bills, be sure to make it a habit to file away the statements or any other information you receive in the mail. Keeping up with filing will change your financial life and will make the overall picture much clearer for you. You will find that after you do this, it is much easier to sort though your files and knowing what you owe is much clearer.
