Organising and managing one’s finances are vitally important, especially in these tough economic times. No matter what the income level or source, simply being aware of the status of personal finances can go a long way toward keeping money problems at arm’s length
Keeping financial elements organised may sometimes seem overwhelming, particularly when starting from scratch, but following a few simple steps will keep those bills under control and your accounts in the black.
Organising your finances step-by-step
The first step in organising one’s personal finances is to make a monthly budget. Planning out the monthly spending is only a part of what budgeting accomplishes and, although some expenses will remain static, the monthly budget will need to be revised from month to month as payments increase or decrease. In the winter, for example, heating bills tend to increase, making some budget adjustments necessary in other spending areas.
It is also important to consider what can be saved when putting a monthly budget together. Many financial experts recommend saving 10 per cent out of every pay cheque, as well as 10 per cent from any other source of monthly income such as interest on bank accounts or investments. Also, it is a good idea to factor in an allowance for ‘incidentals’ when pulling the budget together, catering to some frivolous spending that does not interfere with bills and other commitments.
Keeping track of overall spending is a very important part of any monthly budget. There are numerous types of accounting software programs available that make the process of monitoring spending as simple as filling in the blanks. Software programs can even create the monthly budget itself, make adjustments and revisions quickly based on a single change in figures, and may be able to estimate future expenses based on established patterns of financial behaviour. These programs also offer the benefits of IT support and assistance that is just a phone call or click away at any time, day or night. Or you can just use a simple spreadsheet as I do.
Work to a system
In addition to creating and following a budget, one of the most important steps to take in managing finances is to pay all bills on time. Estimated payments for bills, based on past payments or averages, should already be factored into the budget, so when bills arrive in the mail or are accessed online, they should be paid immediately – or at the latest by the due date specified by the service provider or creditor. Occasional lateness of a few days or even a week is possible, of course, but establishing a pattern of paying bills in full and on time is not only a good habit to develop, it also demonstrates to service providers and creditors good faith and consistency in paying. This can be a useful history to have in occasional cases where lateness cannot be avoided.
Finally, a beneficial tip for organising finances: operate multiple bank accounts. Open two current accounts and a savings account. One current account should be for bills, the other for monthly spending, while the savings account holds the 10 per cent commitment and remains untouched, earning interest and building a saving mentality.