This summer has been so fun but summer also tends to strain the budget a bit. With vacations, summer camps, eating out, back to school clothes and the endless school supplies… well yikes.
While I am setting up new routines and schedules for the kids, I thought it would be nice to get all organized again with our budgets, bills, and spending. This is for sure a perfect time to jump on board with me as the holiday season is going to be here before you know it.
So here are a few things that might help in getting your financial house in order this year:
Brainstorm your goals.
To get started organizing your finances I think it is great to write down the financial goals you and your spouse might have. Maybe you want to pay off some debt or maybe save for a trip or a major expense. Boost your retirement savings… college funds… emergency funds. There must be a reason you decided to read this article and jotting down some goals is a great start. I find that goal setting helps me stay focused and motivated to keep an eye on the big picture of our family and not get sidetracked by the little things.
The next step is organizing paper files.
Now I have to be upfront and say I absolutely love creating binders and files and feeling very organized and put together. Those lovely files and binders and forms and such all fall by the wayside after a few weeks to never be used again. So I tend to avoid keeping a lot of paper files unless I really, really do need them. I don’t keep paycheck stubs, bank statements and other things that can be found online easily. That is important for me because it keeps my office free of excess paper and clutter.
If there are lots of papers or statements you really feel you need, you can always scan them into the computer and organize in labeled files or take some time to purge and sort and organize what you do need in hard copy format.
This is also a good time to make a list of your monthly bills. There are all sorts of free printables for this on pinterest but honestly I like to open Excel or Numbers on my Mac and just create a super simple spreadsheet with all our bills for each month. It is a great checklist if you struggle to remember certain payments or to help with the budgeting process to come. I have to tell you guys we pay all our bills online and automatically except the kid’s school tuition. I always forget to drop that payment off and the school comes after you for a whopping $25 late fee if you are even a day late. I actually set an alarm on my phone to alert me on the 4th that I must pay tuition. You might consider making notes or setting up reminders if you struggle with certain bills as well.
How to get organized electronically:
If you receive things electronically via email such as statements from financial planners or correspondence with your attorney about wills and such, you might consider creating a file within your email account. That will keep things separate and easily accessible when needed.
Outside of email, you might also want clearly defined file folders on your computer with any important documents you need.
Another aspect of getting electronically organized is figuring out a means to monitor your spending. I enter all of our personal and business finances into Quickbooks. It isn’t my favorite software program but it is simple and I can see exactly where all of our money has gone via reports quickly and easily.
Next setting up budgets:
Ideally a budget is created each and every month. Expenses vary considerably from month to month- for example your clothing budget might be higher in August as you are buying back to school clothes and fall items. Your dining out budget might be higher in summer when you are traveling and attending outdoor concerts and movies and events.
Ideally the budget starts with fixed expenses such as mortgage, car payments, electricity and so on, add in variable expenses such as groceries, personal care, home improvements- total the spending and measure that against your income. Make adjustments as necessary to the variable expenses so you are always living below your income and not at your income or above.
The key to an effective budget is actually using it and understanding it is a living document. (Not something set in stone.) This is where free resources like Mint.com can be super handy. In our house, I try to balance the business and personal checkbook weekly to stay on top of things and be sure our spending is on track. I find it easier to get a little maintenance done weekly as opposed to a lot of work monthly or quarterly. If I fall behind with the banking, Mint will send emails alerting you about unusual spending and quick budget summaries. In July, I got carried away at the Nordstrom Anniversary sale and spent a bit more than planned in our July budget. Since I do monitor spending and the accounts weekly, I immediately saw the spike in our clothing category and I was able to shift things around and cut back in other areas to accomodate the extra spending.
If this is your first time creating a budget or you want to start from scratch, it is a good idea to take one month and monitor all of your expenditures. That will at least give you a clear idea of where your money goes to serve as a starting point to create your budget. When we do budgets sometimes I am completely sick at how much money we spend in certain areas (hello Target stores, I am looking at you!) so it is a good idea to really monitor carefully where the heck your money does seem to go. You want to be the one in charge of your checkbook not the pretty aisles of Target beckoning you in.
So at this point your paper files should be organized, your electronic files, you should have a budget established and a system of balancing your checkbook.
NOTE: At the end of each month I like to compare what I actually spent to what I budgeted. That is a huge help to be sure you are being realistic with expenses and see where you might need to make changes. A budget is completely useless if you aren’t following it, tweaking it and making it something that actually works for your family.
Check your net worth. The last step is to check your net worth. This is something that only needs to be updated every so often or after a major windfall or purchase. To calculate your net worth is fairly simple:
Add up all of your assets in one column: boats, cars, homes, stock portfolios, investment accounts, bank accounts, antiques/jewelry, and any employer accounts like 401k or IRA or pensions.
Once you total the assets, in another column add up the liabilities. Any debt, credit card bills, loans, taxes, mortgages and so on.
Now compare. You might be excited, you might be right where you thought you were or you might be really depressed. But at least you know in black and white exactly what your net worth is and from there you can make smart choices for your future.
Next steps. Hopefully you have your papers organized, your electronic correspondence and paperwork filed away, a method of managing your finances set up (for us it is Quickbooks but there are tons of methods available), a rough budget established, your net worth calculated and now it is time to take action.
You hopefully have the information and now you can see how to get to your goal. Maybe you need to start saving a bit more so you can afford that special vacation- break down what you need and create an action plan to get there. Maybe you are realizing you are currently living way above your means and just cutting things too close each month. Now is the time to consider a second job, consider downsizing, or brainstorm ways you can start making more money. We did this years ago when we realized we were living paycheck to paycheck. I got a part time job at night when my husband was home to care for our baby, I worked weekends as well and he started a little side business to bring in a little more income. We were living modestly so for us it was a matter of increasing our income not cutting back on an already tight budget.
Perhaps you are happy with how things are going but want to focus on paying off the mortgage or getting 1 million dollars in your retirement accounts. What do you need to do to reach that goal? What steps can you take starting TODAY to move forward? I really like focusing on the goal of the family when managing finances. If I focus on specific things like cutting spending or budgets, I tend to feel deprived and it makes me grumpy. When I focus on the goal we have in mind instead, I realize it is a trade off. If I don’t buy xyz item or I cut back on spending here, I can instead put a bit more into retirement or into savings or toward our mortgage. It helps me go from feeling deprived to feeling empowered and inspired.
And two other little things to consider for your family:
~Create a will. This is literally on my list of things to accomplish this week. We have procrastinated on this for ages and our financial advisor gets on us every single time we see him to get this done. It is incredibly important- especially if you have kids.
~Review your company benefits package. I absolutely hate looking at forms and packets and paperwork. I can barely manage to keep the kid’s stuff signed and returned. Now that you have your finances in order, it might be a good time to take a look at the benefits program offered by your company. Are you taking advantage of everything they offer? My major goal for September is to take a look at my husband’s benefits for this exact reason. Things have changed and he has been with the company for years and years. I know we haven’t done anything with the HSA program and we are missing out there so time to look into it and see what might work for our family.
I hope this is helpful to getting on the path to financial organization for your family. I would really love to hear your tips for getting organized and what things you use to stay motivated.