For a lot of us, organizing our finances can feel about as manageable as flying to the moon. It's also scary, and sometimes we just want to ignore it until it goes away. But relatively simple money management hacks do exist, and they actually aren't all that intimidating. It's often just about knowing a few basics and making sure we're actually knowledgeable about how much we have and where it's going.
If you feel a little out of your depths when it comes to personal finance, you're absolutely not alone. In fact, according to a study featured on Forbes, our capability with money — specifically how we choose to spend and save — may in large part be determined by our genes. The report's author, Dr. Hersh Shefrin, a professor in the finance department at the Santa Clara University Leavey School of Business, said, “Only 25 percent of us are born with the ‘good’ variant of that gene. Some people are simply better than others at self-control, and neuroscientific studies have shed light on why this is the case.”
However, Shefrin also noted that it appears nurture trumps nature when it comes to our ability to adequately manage our money; essentially, just because we weren't necessarily born with great money-management skills definitely doesn't mean we can't learn to be good with our money.
If you're afraid you'll never get on top of your finances, or that money-management just isn't your "thing," here are seven hacks for organized finances that will instantly get you on the right track.
1. Commit Your Time
A piece on SmartAboutMoney.org about basic money management lists simply managing your time as the first and most important step to organizing your money. "During the next month, dedicate time each week to thinking, talking, and learning about money management. Consider financial planning to be part of your normal routine. Just as you would schedule time to go to the grocery store or visit the gym, you should also plan time to maintain a healthy financial life" the org said. Even if you just start by learning about key financial terms, or budgeting basics, your time will be well spent.
2. Create A Budget
In a piece on yearly money management in U.S. News and World Report, finance writer Geoff Williams lists creating a simple budget as his top tip. According to the article, a good rule of thumb for an ideal budget is home expenses at 35 percent, transportation at 15 percent, paying off debt at no more than 15 percent, savings at 10 percent, and miscellaneous items, like eating out, at a total of 25 percent.
3. Get Organized
In an article about ways to clear paper clutter for HGTV, special projects editor Kayla Kitts stressed the importance of a solid filing system in order to quickly and efficiently organize important documents. "Start by clearing off the kitchen table and creating stacks of the same type of paper or mail," she said. "Car insurance, health insurance, utilities, taxes, credit cards, bank statements, receipts, etc. It may be easier to combine certain areas and create broader subjects like bills, insurance and personal. The important thing is to have a go-to file for each subject for reference."
4. Separate Wants From Needs
A piece from the money management site Mint.com recommended separating wants from needs when your create your monthly budget. For example, pet food and groceries are necessary items you must buy each week. A morning cup of coffee from the local coffee shop, however, is technically a want, and therefore should go in the miscellaneous section of your budget. Be super conscious of how you think about different items in your life for this step.
5. Budget For Fun
Mint.com also noted that budgeting doesn't mean living like a monk and never splurging — it just means budgeting for fun as well. "A properly managed budget can and should include planning for vacations, visits to distant relatives, parties for friends and other special moments," they noted. "Set up a savings account for that dream trip or other fabulous reward. Once you've saved the money for it, no one can say you haven't earned it — and the incentive to save will help you keep yourself honest where other areas of your budget are concerned."
6. Start Thinking About Credit
OK, credit cards are kind of a big deal because they can really help you or really hurt you depending on how they are used. SmartAboutMoney.org lists opening a couple credit cards on its money management essentials list, but only because a good credit score (which only comes from paying your credit card bills on time) can help you get loans later in life for the bigger things you might want or need, like a car or a home. "Pay credit card bills as soon as they arrive to avoid late-payment fees. Always pay more than the minimum balance due. If at all possible, pay off the entire balance each month, " they note.
7. Keep Taxes In Mind
In that same U.S. News and World Report piece, professor of accounting Rick Davis noted the importance of keeping your taxes in mind every month as opposed to trying to do everything all at once at the end of the year. "You should have a separate tax folder, divided into files by types of relevant items: income, charitable contributions, interest payments, tax payments, education expenses, et cetera." That way, you won't be scrambling to figure out what you're able to deduct when the time comes.
Organizing your money is absolutely not impossible, and in a lot of cases half the battle is just blocking out the necessary time to get it done. If your finances feel messy and out of order, do yourself a huge favor and take a few hours of your weekend to create a budget and organize your documents into a workable system. It will be the best few hours you ever spent.