LOOK AT IT ALL!
AND I MEAN ALL OF IT: Before you can make change, you need to take stock of your financial situation. This includes bills (one time and recurring); debt (list each and every credit card, its balance, its interest and the monthly minimum that is required as well as the amount you usually pay); the savings (bank accounts and regular savings wherever they may be; IRAs, 401(k)s, other retirement plans etc.), and all of your assets (cars are generally not an asset unless you owe less than they are worth). Write it all down so you can see where you stand. This is truly the first step that must be taken before you can do anything to take control over your money.
While getting control over your paperwork will not make you money or directly take you out of debt, you must know what kinds of problems you are facing in order to pull yourself out. There are a few basic products that have helped me to get my finances organized and to maintain that organization. The first is just a simple spiral notebook. This book goes almost everywhere with me and helps me to keep track of ideas or spending during the course of the day. It was where I decided to make my first list of all my expenses, debts, savings and assets. A simple pen and paper list is sometimes the easiest way to get started. In fact, when I started, I guessed at everything: I made the list as I went along, first from my head and then by looking at my bank statements. Another way to make the list is to make it ongoing for a month (although I don’t think you should wait so long to take control over your finances).
But the point is that you want to create an accurate financial list of each and every bill that you have: the total debt, the monthly minimum, etc. And, whether this can be done today or over the course of the month, you need to get it done because you cannot solve your problems if you do not know what exactly they are. When that list is complete, believe me you will be shocked. You will be shocked at how much you didn’t realize about your debt: its total, its monthly expense; how much you are paying in finance charges (the amount you are paying just to have used the money). You will start to understand why money always feels tight: because it is. Your monthly debt payments may be eating up so much of your take home pay, that you don’t have the money left over to pay your everyday expenses, let alone all the extras that we like to have in life. You might also be pleasantly surprised about a few things: some bills that can be eliminated quickly, or debts that are coming to an end. If you’ve had 401k’s from different jobs and haven’t paid attention to them, or never added them together, you may find that you have a bit more saved for retirement than you anticipated. But, you need the list of all your debts and all your savings in order to take control over your money.
The second product I am going to recommend is financial tracking software. I have begun using Quicken 2007 , and what I love about that program is that it allows me to get an even more accurate picture of my finances because I can categorize every expense: thus, I can go in and figure out how much money I spent last month in finance charges, or for groceries (if I paid with a card of some kind). It allows you to download the information, saving you time; however, I prefer to put everything in by hand: it keeps me far more aware of the various ways I spend money. For me, Quicken has been amazing: I downloaded it and within a week had almost every account we have on it. I’ve probably spent 10 hours on it in total: there was virtually no learning curve, every moment I have spent on it has been spent keying in information. I am adding a new feature that I will need: a cash tracking account; after I do so, I’ll be able to have an even better picture of where we spend our money.
The third product that I have found extremely helpful is an excellent filing system. It is not an actual set of files, but rather a file system for the home that has pre-made categories in it. It takes about two hours to set up (and, you need to order or buy the files themselves), but once it is set up, it makes your filing easy to accomplish and easy to handle. It is called File Solutions and can be ordered directly from the company, http://www.filesolutions.com. (I have absolutely no affiliation to this company, I just use the product and love it).
If you are finding it difficult to get your finances organized so that you can take a good, hard look at them, you are not alone. Here is what I have been doing lately to make my family’s financial situation far more organized:
a. Getting it all together. I’m a teacher; therefore, I spend a lot of time during the school year avoiding my personal mail, etc., and just paying my bills once a month on-line. I rarely look at actual due dates (making our credit situation not so pretty) and often end up paying late fines. My major project this summer is two-fold: getting a handle on our financial situation and de-cluttering my house to make it look nicer and be easier to live in. How am I doing that? I once got a great piece of advice that is perfect for tasks that are tedious or overwhelming — require yourself to only do the task for 15 minute periods. In fact, I set a timer for my decluttering in general including my paperwork. I tend to spend well more than 15 minutes on the task; however, the timer makes it seem like it’s no big deal: anybody can do almost anything for only 15 minutes, right.
b. My first job was to clear off a table of accumulated paperwork and to find every statement for everything we pay bills on – once I got rid of a great deal of the stuff we had no need for, (mostly in the shredder), I was just randomly putting the rest into a “to deal with” mail holder, which, itself, became a clutter keeper. So, I went through that with my file boxes & my notebook sitting on my dining room table and dealt with it. The best advice for paperwork is to touch it once. I’m happy right now touching it twice: once when I open it, and, sometimes, later, when I deal with it again. (I am looking into a better set up of my home office so that the files can be easily accessed and I can really only touch once.)
c. I then put it all into my spiral notebook as I found it: debts, starting with the mortgage, the home equity line of credit, the cars and student loans and moved down to regular credit cards and store cards. Each debt got the same notes: Total amount left, interest rate, monthly payments, and “minimum payments.” I also wrote down the other monthly expenses that may or may not have been “discretionary” — it took me a while to figure out all of them, as my statements came in, I could find a lot of what I was looking for. Thus, we had utilities and services, groceries, newspaper delivery, water delivery, home care, books, magazines, lessons, the exterminator, gas, cleaning, allowance, commuting, etc. It was great to look at it on a page and see how much money we spend a month and how much interest we pay a month, a year, a life time. It was a true “AHA” moment, and life has been very different since that time. As I paid the bills that month, I put a running list in my spiral notebook — new balances and amounts paid.
d. Then, I put all of the information into Quicken as I explained above. I may have a few accounts that are not yet set up; I have been taking the statements as they come in and creating a Quicken account from those statements. The next step is to create a Quicken cash account.
e. It was that process that led me to realize that we were going to be in dire financial straits if we did not take control over our financial situation and soon. That is what led to the steps we have taken since organizing and the ideas we have generated. Ultimately, it also led me to create this site as both a source of accountability and a source for others for advice.
f. I am now in the process of figuring out how we are doing since we have starting taking control over money.