Sunday, January 1, 2017

Women's Money Week: Financial Organization #wmweek17

I've had a financial organization system for longer than I've had this blog. It went through a number of changes while I was single, and then a big change when Peanut and I merged our finances, and every year we tweak it a little and make it a bit better. Here are the components:

1. A tracking system. I've used everything from a piece of paper in a notebook to our current Excel spreadsheet that uses a pivot table to calculate our monthly spending by category. For me, tracking spending is the most important component of a budget or financial organization system. If you don't know where your money is going, you can't tell it what to do. We don't have a budget but we do track every dollar we spend, and it helps us meet our goals.

2. A filing system (or two or three). We have one small filing cabinet for paper stuff, but mostly I use email as my filing system. I set up filters in gmail so that all my financial documents go to one folder, and I set up electronic delivery for every bill, statement, and financial paperwork that I can. Email is keyword-searchable, so it's a lot easier to find something there than wonder, did I file it under C for Car or T for Toyota or I for Insurance? We also have a lot of things filed away in an offsite backup program, like digital copies of tax returns and other important financial paperwork. Some stuff just has to be paper though, so we do manage

3. A goal. It's hard for me to stay excited about money when we don't have a goal. It's easy for me to cut back on my spending or save when it's for a downpayment on a house or killing a student loan bill. It's much harder for me to save whatever's leftover at the end of the month without a "reward" in sight. (This is why I try to max out pre-tax savings first!)

And one warning: a financial organization system should not be overbuilt. I tend to overbuild my tracker in a mean way. For a while I was juggling multiple checking and savings accounts due to freelance work, as well as multiple trackers and it's just so complicated. It doesn't need to be that complicated. I recommend the fewest number of accounts that you can get away with (including retirement - keep rolling those babies into an IRA!) and the simplest method of recording your spending. It makes it easier to use and therefore more likely to be used.

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