Quick Personal Finance Tip-How to Keep Your Finances Organized
Welcome to another new feature at Barbara Friedberg Personal Finance, “Quick Personal Finance Tip.” This feature gives you access to quick tips to further your financial goals. Look for these tips periodically. Better yet, pick up my RSS feed and follow me on twitter so you get the word immediately.
I have been reading the 31 Days to a Better Blog for about 5 months now (obviously, I’m a bit behind schedule) and one of the assignments is to solve a problem for the reader. Although, I of hope that my entire site solves your problems, I am taking the direct CHALLENGE with this article.
PROBLEM: How to Efficiently Manage Your Finances
Organization and time management are big issues today. I’m good at financial organization, so I thought I would give you a quick list of how to handle your finances with minimal effort. For most, these routine tasks aren’t fun, so the GOAL is to set up systems to pay the bills and organize the records FAST.
Step 1: Understand Personal Finance Categories
BILLS: Every month you have to pay bills.
CHECKING & SAVINGS: Maintain and track cash to make sure you have enough on-hand for current expenses, emergencies, and short term plans.
INVESTMENTS: Keep track to make sure you are on target with your financial goals.
TAXES: Almost everyone must complete a tax return or two each year. If you have any self employment income, rental properties, etc. keep good records.
Step 2: Complete Financial Record keeping FAST
BILLS-30-45 minutes per month
- When they come in the mail or your email in-box, put them in ONE PLACE. I use a small old file. For email, use a folder labeled bills to pay.
- Once or twice a month, schedule on your calendar; pay the bills. My mom pays them as soon as they come in, but that is inefficient! Others recommend calling the company to synchronize all the due dates. Again, too much work. I pay two times per month.
- Set up “free bill pay” at your bank. Log on to the bank site, plug in the bill dates and amounts and pay. Time spent, 10 to 15 minutes.
- Throw the bills in a folder labeled “RECEIPTS” or “PAID BILLS.” If you have some taxable bills, place them in a folder labelled “TAXABLE EXPENSES” OR “SCHEDULE C.”
INVESTMENTS-1-2 hours per quarter
- I know I’m going to get some flack for this; especially from those of you who post Monthly Net Worth updates. But, I recommend updating your investments quarterly. Hopefully you are regularly contributing to your 401K, savings account, and/or investment accounts. These assets are for long term goals, college, retirement, big-ticket items so why obsess over their value every month?
- Use a computerized system. I use Quicken, many use Mint.com and other programs. It does not matter which one you choose.
- After every quarter, download your investment transactions, and update their values.
- Keep a paper copy of every buy and sell transaction. You need this information for tax reporting when you sell.
BANK CHECKING & SAVINGS-15-20 minutes per week
- Download banking transactions once or twice per week to check accuracy and balance. If you don’t use a debit card much or make a lot of withdrawals, check lesss frequently.
- Quicken reconciles the account on-line in seconds. Do this once per month.
TAXES-time commitment varies
- When tax related items, W-2’s, 1099’s etc. come in during the beginning of the year, place them in an envelope.
- If you do your own taxes like I do, pull out the information in March and input (or import from Quicken) into a tax preparation program such as Turbo Tax. Depending on the complexity, of your situation this could take anywhere from a couple of hours to a few days.
- If you hire a tax preparer. Take your file to your tax preparer and go over it with her/him. Make sure to check the preparer’s work for accuracy.
The set up takes some time, but once the on-line bill pay, Quicken program and approprate folders are organized, the maintenance is simple. And one last suggestion, make sure that you simplify your finances and keep your significant other aware of financial matters.
How do you maintain your personal finance record keeping? Am I missing anything?
Get a notebook and label it: “(your name) Personal Finance” and keep it by the computer. Use it to keep all of your personal finance goals, thoughts, activities, and plans.
Feeling super motivated? Why not go for 31 days to a better bank balance at Money Crush?