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budgeting, financial-planning

How To Organize Your Finances

Most people think of their closets or office space when they think about organization skills. What you may not consider is how these skills can help you stay on top of your financial game. Learning how to organize your finances can help propel you towards a better financial future, and even save you money!

If you have piles of paper bills and statements, they can get lost easily and cause you to miss vital bill payments. Not to mention the harm of not setting up a proper budget to control your spending and savings. These are just two of the many bad habits that could cause you to incur late bill payment fees, overdraft fees, interest, and more.

The idea of creating a budget and sorting through your finances can sound stressful or even daunting. Not to worry – your financial allies here at Finally have created this list of good habits to help you learn how to organize your finances.

Set Financial Goals

We know it sounds cliche, but every great plan starts with the goals you want to accomplish. Take a moment to think about your future. Here are a couple of items you might want to save for:

  • Your dream vacation
  • Retirement
  • Purchasing a home
  • Purchasing a new car
  • Your wedding
  • Having a baby
  • Your child’s education

Document your goals and keep them as a reminder of what you are working on. Make sure to create goals that are specific with estimated amounts and timelines. Set up your goals in Finally to figure out how much you will need to save every month to reach your goals.

Review Your Spending

There are those days when you don’t feel like packing a lunch for work, or you splurge because your favourite store is having a sale. And who can resist Starbucks Happy Hour? At the moment, it may seem harmless, but an accumulation of these unplanned expenditures add up by the end of a quarter or a year.

To best plan for success, take a look at your monthly spending on all your debit and credit cards. Try to estimate how much are you spending on things that you need vs things that you want.  Once you have a better understanding of your monthly expenses, you will start realizing how much money you can save by not spending on unneeded items. This will be your baseline for setting a dollar amount that you are comfortable setting aside for savings without affecting your current lifestyle.

Let’s start by sorting out your expenses into categories to help you understand where you spend the most. You can start with these basics: housing, transportation, utilities, personal, food, clothes, entertainment, debt, savings, gifts.

Once you have an idea of how much you spend on each category, ask yourself some key questions.

How much do I spend on things I really need?

Tally up all the items that are essential, like groceries, housing, and utilities. The total from this calculation will give you an idea of your minimum fixed expenses.

Where am I overspending?

Some categories may surprise you in terms of how much money you’re spending on them. Take note of these and look for ways you can cut back. Maybe you limit yourself to only one trip to Starbucks per week or pack your lunch instead of all those Uber Eats orders.

What don’t I remember buying? What do I still use?

This question is a crucial indicator of items that may have been a poor investment. If you don’t recall the purchase or did not end up using a product or service to its full extent, this is likely money that you could have spent to pay off debt or a better investment for your financial future.

How to Create a Budget

Now that you have your goals and a full overview of your spending, you can create a budget. Your budget is where you will record your sources of income, list out your monthly expenditures, and plan your spending.

Crafting a budget starts by defining three amounts:

  • Your fixed expenses
    These are the items you have to spend on, like groceries and rent.
  • Your variable expenses
    These are items you sometimes buy but don’t need, such as food delivery.
  • Your saving commitment
    This is your income, less your fixed expenses and variable expenses.

PROTIP: Things change! Try using Google Sheets so you can make live updates to your budget from any device as new sources of income or expenses come in.

Plan a Finance Day

Now that you have completed the hard work, you need to stay on top of your financial goals and budget. If you’re still learning how to organize your finances or develop good financial habits, be sure to schedule a day in your calendar to revisit your budget at least once a month. The more often you record your expenses and savings, the easier it will be to determine if you are on track to meet your financial goals.

Each time you review your budget, figure out if your spending came in lower or higher than what you budgeted. If you overspent or had an unexpected expense, look at other areas you can cut back to accommodate for the loss. If you came in below your spending allowance, think of ways you can invest your extra cash in meeting your financial goals. Finally will help you adjust your goals based on your monthly budget, so when your budget changes, Finally will tell you how to distribute your budget toward your planned goals.

Use Finally

Learning how to organize your finances can be tough on your own. But your financial allies are here to help you move towards a secure financial future.

Finally is a financial planning simulator that allows you to build your very own financial plan within a fast and easy-to-use platform. You can set your personal financial goals, track your progress, and get a holistic and comprehensive view of your financial future with an actionable plan on how to best distribute your funds. We also provide custom recommendations on the financial products and providers that might help you reach your financial goals faster.

Ready to create a plan for your financial future? Click here to get started.

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Financial planning should be available to every Canadian, regardless of their financial situation. Finally, we are here to help you get where you want to be.