Organizing your money allows you to eliminate your financial stress, to get the most out of your income, avoid unnecessary expenses and achieve your financial goals. Conversely, a lack of organization can hurt your finances just as much as having little or no cash.
By following a few simple rules, this is easier than you might think. You just need to change some habits and maintain these good financial practices.
With a simple guide, even the most disorganized person can take control of their finances and learn the best way to organize money, to make it work and establish a growth plan.
“Money, like emotions, is something you have to control to keep your life on track”
Why is Organization and Financial Planning Important?
If you are struggling to make ends meet, to pay off your debts, or to make money work and save, you need to regain control of your finances, starting with organizing your money.
Organizing your economy is the first step to financial stability. If you are not organized, each of the tasks will be more difficult and you will even have no idea where your money problems are.
For this, you do not need to become an accountant, but follow some simple steps. In a recent study on financial habits, some of the rules that wealthy people tend to use were compiled, such as:
- Whenever you can, pay off the debt in full.
- Save for big purchases.
- Have an emergency fund that covers at least 3-6 months of expenses.
The organization of money makes it easier to meet financial obligations, to clean up your economy and maximize your financial potential.
7 Practical Tips to Organize Your Money
1. Create a Budget
Prepare a budget and put it in writing.
An easy way is to start by writing down all the income for the month in a column. In another, write down all your fixed expenses, that is, what you inevitably have to pay, such as rent and bills.
Once finished, subtract your fixed expenses from your income. This is the money that you have free from month to month and you can use it for other expenses, such as entertainment, vacations and other extras, and of course reserve a part for your savings.
This is the basis for you to understand the money you can and cannot spend.
For example, you may decide that you need to spend less each month on entertainment, because you have decided to start saving or investing.
2. Get Rid of Debt
If you take a critical look at your finances and realize that your biggest problem is your debts, you should address them first.
Prioritizing the payment of debts is the healthiest financial attitude, since it has a great impact in the short term.
Therefore, the second step is to start cutting your expenses to pay off your debts as quickly as you can.
For this, there is a rule that you can follow. Check the monthly interest rate on each debt and pay off the one that costs the most each month first. This way, you will avoid wasting your money paying interest when you could be paying down the debt. This is called the cascade method.
Although you could also apply the snowball method, with which you will pay the smallest debts first.
3. Avoid Unnecessary Expenses
One of the biggest obstacles to financial success, in addition to interest rates, are late fees, default fees and overdrafts, which arise from harmful consumption habits.
To organize your money, you also need to change these spending patterns, starting by sticking to the budget you’ve set and eliminating debt.
You can achieve this if you differentiate between needs and desires, resisting the temptation to buy what you don’t need. If you can not deprive yourself of it, establish in your budget a sum of money for wishes, and do not spend more.
4. Create a Fixed Savings
Just as fixed expenses like rent and utilities are essential for living, savings are essential for your good financial health and also for your peace of mind. Therefore, it is necessary that you save, month by month, a fixed amount.
To start, it is very important that you have an emergency savings that you can fall back on if something unexpected happens. But, in addition, having extra money allows you to have a more proactive life, since you can make decisions without money being an obstacle, such as creating your own company.
According to a report on financial habits , people who are not in the habit of saving have particularly low financial well-being and are more likely to think that finances control their lives.
5. Set Your Overall Goals
To organize your finances and move toward your goals, you need to set your financial goals, which will guide you toward the future you envision.
Without goals, you may quickly lose interest in making financial improvements. The easiest way to do this is to figure out what you want to achieve, figure out how much it would cost, and create a savings or even investment plan.
But remember that your goals must be, above all, realistic, since you need to achieve them month by month in a relatively simple way. At the same time, these goals should arouse some enthusiasm in you, so that you stay motivated.
6. Start Investing
Once you’ve organized your budget, gotten out of debt, established healthy spending habits and a savings plan, it’s time to start investing.
This is the way you make money work for your own benefit, for a solid return.
If your goals are short-term, it’s best to keep your money safe, in a savings account, cash management account, or a low-risk investment. But if your goals are long-term, like retirement, you could invest in stocks or index funds .
7. Find a Financial Mentor
To better organize your finances, perhaps you should consider getting professional advice.
This type of financial mentoring service has the advantage that it pays for itself over time. In addition, it is a good investment for the future, as it allows you to improve your financial situation.
A financial mentor can even help you prepare your budget and guide you to achieve the goals you have set for yourself, starting with organizing your money.
When Are You Going to Start Organizing Your Money?
People who organize their money make the easiest progress toward their financial goals. Without organization, not only will you not be able to control your finances, but you won’t know why you don’t have money.
From now on, don’t let financial disorganization hold you back any longer. Follow these tips, establish your own rules and stick to them with discipline, to manage your finances in the best possible way.
