by Scott Bilker
The beginning of my financial life was when I received my driver's license. Before that I rode my bicycle around and had no bills. Well, I needed a car, right? I had to get to work so I could pay for the car, to get to work.
That's what started the bill cycle. The car was used (pre-owned), so I had no payments, but I was using my gas credit card to get around. And let's not forget that I could now go to the mall, buy stuff, and take Larissa on dates better than McDonalds (we started dating before I could drive). So it didn't take long for the bills to start arriving in the mail.
I just didn't know what to do with this mail. Nobody ever showed me a system for managing bills because I didn't have any to keep organized.
So what did I do back then? Probably what many people do today. Bring in the mail, stack it on a desk, and tend to the pile at the last minute. Hopefully, I didn't miss too much because I frequently found mail on the floor behind the desk.
It didn't take long for me to realize that I had to do something. I had to get organized!
That was a lifetime ago, really, I was 18 then, now I'm 36 and insanely organized about handling money, bills, and all finances. I've learned over the years that the better organized you are with all your transactions, the less likely you are to:
- Bounce checks.
- Exceed credit limits.
- Pay late.
- Get charged for stuff you didn't buy.
- Get hooked into extra charges.
- Be stressed over bills.
- Go into perpetual debt.
- Let fraud go unnoticed.
Here are the 9 quick steps to getting organized for financial success--today!
1) Filing system.
When it comes to getting organized, everything needs a place, a home, a spot. The basic filing cabinet is the best way to organize the paperwork.
The hanging files are the best. They're just easier to work with, easier to access. A basic filing cabinet costs around $30 and is well worth the price.
Once you have a filing cabinet, and some hanging files, create a file for each bill and bank account, for example, mortgage/rent, electric, cable TV, water/sewer, health clubs, checking account, savings account, cash receipts, etc. For credit cards, I name the file by the bank name and the last four digits of the card number, i.e., "Citibank 4323."
Lastly, create one more file called, "Bills Unpaid." This is the place to put all those annoying statements until you have time to write the checks.
2) Take care of the mail when it arrives.
Don't let the mail pile up! As soon as you bring in the daily stack of bills, which is what most of it is anyway, go through each envelope immediately. What I do is open every bill, throw away all the frivolous inserts, staple the statement to the bill-payment envelope, then place it in the Bills Unpaid file
Now, when you're ready to sit down and take care of the payments, all your bills will be in place. You won't have to spend time going through each envelope before writing the check.
3) Use accounting software.
I know everyone reading this article right now has a computer. That means you should be using software to track your spending and organize your financial life. I cannot think of a better use of the computer for people in general!
"If you have a computer, then you should be using financial software." That's a quote.
Why?
Money is like the blood of your financial life. It flows into every aspect of what you do. It circulates in, out, and all around everyone in the family. By using your computer to track spending, you'll always know exactly what's going on, where money is being spent, and how to plan for new purchases.
The most powerful aspect about using software is eliminating that checking ledger. I haven't written in a check ledger since 1987! I have searchable records of every credit card charge and check that I've written in my entire life!
The best part is that I don't bounce checks. It's easy to balance your checking account using the computer. There's no adding, subtracting, etc. You just match the checks (and ATM withdrawals) with your bank statement, and everything should balance. If it doesn't, then you can quickly find the problem.
You know how you sometimes get a bill that you think you've already paid? It's very easy confirm by doing a search with the computer.
A word of caution: if you do use software, then you MUST back up that data! It won't take long for you to completely abandon those paper ledgers, but PLEASE make a back up EVERY time you work on your bills!
Keep in mind that tracking alone won't solve money problems. For example, in 1995, I created a report for the year that detailed all my spending by category. I spent 18% of my income on the mortgage, 11% on groceries, 9% for utilities, 6% on federal tax, 6% on social security tax, 6% on property tax, 5% on medical.
Those are the top-spending categories, which used more than 50% of my income for the year. I cannot make changes in any of those categories unless I decide to sell my house, or cut back on dental fillings. Tracking lets me know where the money is going, but I have limited control over those categories. Areas I can change don't really add up to much, like 1.4% for entertainment.
4) Enter the transactions into the computer.
The software will not be helpful unless you enter the transactions. A strategy for accomplishing this is to put all credit card receipts in the Bills Unpaid file as soon as you get home from shopping. Then you can enter these transactions into the computer on the same day you pay bills.
Entering your transactions in the computer is the confirmation that your perception of what's going on matches your bank's. That means that the information on your computer should be accurate, and the credit card statement better match what your computer says or there's a mistake somewhere. It's your way to make sure you really did charge every item and write every check. It's the way to detect fraud and bank mistakes!
5) Pay bills on a specific day.
The one lesson I learned early on is that I didn't want to be tortured by dealing with bills every single day. That's why I put the bills in the Bills Unpaid file, and that's why I choose to pay bills once every two weeks--on pay day, always a good time, when I had the money. :)
It usually takes me about 2 to 3 hours to pay my personal bills once every two weeks. Once I start on this task, I'm focused! I review every single credit card statement, check, transaction, credit offer, etc. to make sure that I'm receiving the best rates and lowest cost credit options.
Each transaction is carefully recorded in the computer. It's important that on this "bill pay day" everything matches. My billing statement matches what I have in the computer and all accounts balance. All check numbers line up so there are no missing checks.
6) Balance your checking account.
I've already mentioned this point, however I cannot stress it enough. Many people do not balance accounts, and it's very costly if you don't. The consequence: bouncing checks. The fees for this can be as high as $35 from your bank and $35 from the bank of the person who you wrote the check to.
By balancing your accounts and using software to handle transactions, you can easily avoid an incident similar to one that happened to a friend of mine. She accidentally wrote two checks for her mortgage, and the mortgage company cashed both. The result was that ALL her other checks bounced like super balls! The cost, when the smoke cleared, for those bounced checks was more than $800 plus the aggravation of dealing with all the banks, freezing of accounts, and stress.
7) Create a list of all bills and debts.
One sheet of paper listing all bills, debts, due dates, contact phone numbers, etc. is one of most powerful tools for financial success! I've included many of these worksheets in my best-selling book,Credit Card and Debt Management
Each time you pay bills, be sure to update the list. I started out with a list on paper, then I moved to using Excel. Now, because I have so many credit cards, I had to create an Access database to track that information.
You need this list to be your roadmap. It's a planning tool for future spending. You'll be able to see your spending plans at a glance.
8) Create a list of credit offers.
You know that "junk mail" from your credit cards? Well some of those low rate offers are actually VERY good! I always keep a list of current offers from all of my active credit card accounts. Usually, half of my credit card banks are offering me transfer deals with rates less than 5.99%! Some are even a true 0%!
I also keep a list of new credit card offers; however, I do prefer to take advantage of the offers from my current banks since I have a long history of doing business with them, giving me more bargaining power.
The key here is to create these lists. This way, if one of your current credit card banks raises their rate, you don't have to look very far to find a better deal. You don't have to keep a stack of mail to go through. You simply pull out the list and start calling!
9) Start a financial notebook.
I keep all my notes on the computer, but there was a time when I actually wrote in a book, how barbaric is that! :)
Whether by hand or in a computer, this is very important! You need to have detailed notes when you contact your credit card banks, checking bank, mortgage company, etc.
The reason is that sometimes the phone reps don't make the proper notes in your account, and you'll need to reference your notes to keep all those banks in line.
Your financial notebook should include your strategies, for example, "Be sure to transfer the $2,000 balance from the Discover card to the Advanta 3.9% offer by 11/25." The beauty of keeping an organized notebook is that you can refer to your notes, which means you don't have to think about all the details all the time.
So there you have it. I have followed these steps for financial organization for years with incredible results. I've kept my interest costs down, I only have to deal with bills and payment one day every two weeks, I rarely bounce checks, I have corrected many bank errors, and I don't have to think about financial details on a moment-to-moment basis.
Scott Bilker is the author of the best-selling books,
Talk Your Way Out of
Credit Card Debt,
Credit Card and Debt
Management, and
How to be more
Credit Card and Debt Smart. He's also the editor and publisher of
DebtSmartŪ.
|
