According to the Consumer Financial Protection Bureau, in 2015 about 20% of all consumer credit card accounts incurred at least one late fee. In addition, consumers paid at least $15 billion in overdraft fees in 2016. While these numbers are pretty incredible, the truth is most of these fees likely could have been avoided if individuals practiced better organization regarding their finances. If you were one of these American consumers who had to pay extra fees due to a lack of good money management, then now is the time to get organized and stop wasting money on avoidable fees.
Make a Budget
First thing is first. When it comes to organizing your finances, you really need to create a household budget. Unfortunately, there is just no getting around this important step in organizing your finances. A budget will ensure you always know how much money you have to spend and what you can spend it on. In addition, a budget should help you remember to pay all of your bills during the month, save for future expenses, and help you work toward establishing a rainy day or emergency fund (six months to one year of total monthly expenses is a good initial savings goal to aim for). Creating a budget is the only way to truly know whether you are living within your means or spending more money than you bring in each month.
There are lots of different budgeting methods out there including spreadsheets, envelope systems, and electronic budgets. No matter which method you choose to use for your household budget, you will need to begin by thinking about the amount you spend on various categories of expenses each month in order to set spending limits or to budget for each category. These categories might include: housing, utilities, groceries, transportation, eating out, entertainment, pet supplies, clothing, medical expenses, insurance, and savings. Not every household has the same monthly expenses and spending categories, so it is best to think about the unique way you spend your money each month and what your spending and saving priorities are, while also considering your household's total monthly income.
Schedule Bill Payments and Deposits
If you incurred an overdraft fee because you forgot to make a deposit or got stuck with a major late fee because you forgot to pay a bill, then you need to establish a better system for scheduling payments and deposits.
With all of the electronic bill payment tools available today, there really is no good excuse for missing a payment. If you have trouble remembering payments, set up automatic payments to take at least the minimum due out of your account on time. You can always pay more than the minimum at another time during the month, but paying the minimum automatically will ensure you avoid wasting your hard earned cash on future late fees. If you do not like paying bills electronically, then look into purchasing a bill payment folder from an office supplies store. These folders work off of a calendar and a nifty filing system for all of your bills.
Once and for all, solve the problem potentially over drafting your checking account because you got held up at work, forgot to stop, or left your paycheck at home. Ask the human resources department at your workplace about setting up direct deposit for your paycheck. With direct deposit, your paycheck is sent electronically to your bank account through the Federal Reserve Bank's automated clearing house. Once your workplace initiates the payroll transfer, you will have your deposit right away, meaning you have less chance of paying the bills before you have deposited your paycheck.
Streamline Record Keeping
Well organized record keeping is key to maintaining healthy finances. Set up a thoughtful filing system that allows you to store records of the following categories:
- Bill payments
- Pay stubs
- Bank statements
- Brokerage statements
- Credit card statements
- Major purchases
- Any other category that applies to your personal or small business's finances.
If you feel overwhelmed by all of the paperwork, consider storing some of your records electronically. You can sign up for eStatements and even pay bills electronically to relieve some of the filing burden. Receipt scanners are also a great way to store financial records on a secure cloud storage site or an external hard drive.
Although everyone's personal and business financial situation can affect the amount of time required for retaining financial records, a good rule of thumb is to hang onto personal documents for at least seven years for tax purposes. The Internal Revenue Service can have three years after your filing date to audit your tax return. If they suspect you underreported income by at least 25%, they can audit for at least six years from your filing date. If fraud is suspected, then your tax return could face an audit anytime in the future, regardless of the amount of time that has passed. For a complete financial record retention schedule, take a look at the guidelines provided by the Internal Revenue Service.
Track Your Spending and Saving Electronically
Our Online Banking's Manage My Money feature can help you automate the way you keep track of your spending. Once you have created a budget, you can use the online tool to track spending in each of your budgeted spending categories while also setting savings goals for yourself. Use the easy to read charts to visualize your spending trends and watch your finances improve before your eyes.
Although taking steps to organize your finances can feel like a lot of work at the beginning, once you get organized you will not believe you ever managed your money any other way. You will save by avoiding unnecessary fees and be conscientious about your spending habits in a way that would not have been possible before. Start organizing your finances one step at a time, beginning with creating your household budget and filing system. It is also a good idea to discuss any major changes to your household's financial organization system with any other primary spenders and joint account holders responsible for maintaining your newly organized monthly budget.