The 5 essentials of financial organization

Along with losing weight and getting organized, saving more money or clawing out of debt typically round out the top 3 New Year’s resolutions. As far as changes go, it’s probably the most difficult to follow through on. It takes hard work and, yes, organization. But the financial and emotional freedoms that come from not having to worry about money are worth every bit of effort.

We are often asked what are the most important things to organize when it comes to making good on New Year’s resolutions to become more financially fit. The good news is that there are only a handful that are truly crucial to success. Focus on these five and you will be well on your way.

1. Keep a Budget.

If you don’t know what your are spending money on each month, your chances of succeeding in your mission to get spending under control are slim to none. Keeping track is very easy as long as you have the tools for tracking ready as you go through your daily life. There are pen and paper tracking tools, like this free budget printable from and neat apps like Cashish for smart phones. Just get in the habit of jotting down every penny you spend. At the end of your first month of tracking, tally up each category. Then target areas to reduce spending. Track your spending again and see if you can hit those targets. After a bit, the entire thing becomes like a fun game. The trick is just to start. If you’re overwhelmed by the thought, use one debit card to pay for everything one month. Then download your statement and analyze to your heart’s content.

2. Eliminate Paper Bills or Organize Them in a Folder.

In this day and age, you can pay virtually every bill online. Subscribe to online statements or services like that enable you to organize all of your accounts and pay bills in one place. If you ever do need a copy of a bill, you can always print it out. If you are uncomfortable with paying bills online, invest in a project folder or binder with pockets that enable you to group bills by due date. Regardless of how you pay bills, schedule a time once a week and pay anything that is due.

3. Track Your Big Picture.

If you don’t have a snapshot of your total financial picture handy, you need to create one. It’s easy. Simply start a fresh spreadsheet and begin by listing your assets in column A: checking accounts, savings accounts, IRAs, cars, boats, etc. Starting in column B, across the top write the months of the year. Put the value of each asset under the current month. Do the same for your liabilities (credit cards, loans, mortgages, etc.). Don’t get discouraged if your liabilities are more than your assets. Watch the picture improve each month as you track your progress. Celebrate your progress at the end of each month.

4. Maximize Contributions to Your 401k.

Everybody needs to have a 401k and contribute to it every, single paycheck. If you are lucky enough to be employed with a company that matches, you would be crazy not to contribute the maximum amount possible to your 401k. All contributions are pretax, which means they reduce your total tax burden (because they are subtracted from your income).

5. Organize a Sweep Into Your Emergency Savings Fund.

Even if you can only afford to sweep $5 into an emergency savings account each month, having one is a must. Set one up that is NOT directly linked to your checking account (we love ING’s saving accounts as they are more difficult to take money out of). Then put in place a monthly, automatic transaction that deposits the target amount into your savings account. Once your emergency fund reaches 6 months of living expenses, start sweeping those savings into a different, long term savings or investment account.

Do you have these five areas buttoned up? If not, which of these areas do you struggle with? Ask us a question about your weak spot and we might be able to help.