Organizing Your Finances

Quick – how much money is in your share draft account right now?

Surprisingly (or not so surprisingly), one of the biggest obstacles to always having the money for everything you need when you need it, is not having a system to track your finances.

Organizing your finances is one of the three laws of smart money management. The second is The Law of 10 Cents (save ten cents for every dollar you earn). The third is Enjoying the Wait (don’t depend on debt). Getting organized takes time, but doesn’t require any drastic lifestyle changes.

You can organize your finances using software programs or online services, such as Quicken, Mint, Geezeo and Wesabe. They all work well – if you use them. Like purchasing a treadmill, getting started feels like a commitment, but the key is to use your chosen method consistently.

Once you’ve entered information accurately, you’ll have a full picture of what categories are getting what percentage of your income. For example, you might think you spend five percent of your income on groceries, but in tracking your use of debit, credit and checks, it might show you that the percentage is closer to twelve. A software program or online service makes it easy to see all this and more.

Advantages aside, if you know you won’t use the software, don’t buy it. You might use a combination of Excel and Word to track where the money goes, or simply use pen and paper. You need to track income, expenses, deposits, withdrawals, credit card use and every penny that leaves your possession.

If you choose the pen and paper route, buy a special notebook exclusively for this purpose, or get a pre-formatted budget workbook. Figure out what works best for you, and give yourself three to four hours to set it up. Schedule a few minutes every week to update your records.

The payoff? You’ll know where your money is and what it is being spent on, which is the first step to making the changes that will positively affect your level of wealth.