Life seems to be moving faster with each passing day. With more and more stuff being added to your plate, how can you keep track of everything that may impact your financial future? Whether you’re paying the mortgage, having children or saving for retirement, it’s vital to declutter your finances so you can focus on what’s important.
Why is “Decluttering” Important to Your Financial Future?
Your finances, whether you know it or not, come down to budgeting. Whether you’re planning on purchasing a new car, saving for your child’s college fund or buying a plane ticket for that trip around the globe, you should be budgeting for all of it. Part of how to budget your money is setting clear goals and plans to achieve the future you want while removing some of your worry about bills, mortgages and down payments on large purchases.
No matter what stage you’re at in life, taking the time now to declutter your finances can set you up for success in your financial future. To start you off right, we’ve got nine ways to declutter your finances, so you can simplify your life and get back to the things that matter the most!
1. Create a Dedicated Space for Managing Your Finances
Set aside a space where you focus on budgeting and financial planning. It could be an entire room, just a desk or a dedicated drawer. It’s important to keep monthly bills and known upcoming expenses in this location.
Setting a physical space aside will help you organize your finances and change your mentality on how you approach and use those spaces. Creating this space will force you to focus directly on your financial planning. This change in mentality will help you to assess your financial goals and needs more accurately.
2. Decide Which Documents to Keep and Which to Shred
Throughout your life, you acquire many financial and legal documents, so it’s important to know what you should keep and what you should shred. Always keep the following legal documents in a safe place:
- Social security cards
- Marriage license
- Wills, living wills and powers of attorney
- Any business licenses
- Vehicle titles and loan documents
- House deeds and mortgage documents
- Any insurance policy in case of any claims or issues
- Birth certificates
- Any valid or invalid passports
- ID cards
- Pension plan documents
As a general rule of thumb you should always keep the following financial information:
- Seven years of tax records and filing receipts
- One year of medical records and bills in case of dispute or claims
- Warranty documents and receipts for any appliance or large purchase you currently own.
- All home purchase, sale, or improvement documents for at least six years after you sell your house
- One year of pay stubs and bank statements
- The most recent copy of your:
- Annual insurance policy statements
- Social security statements
- Retirement plan statements, whether it’s a 401k or an IRA
Shred everything else. Once you’ve paid a bill, there is no reason to keep it. Shred anything that has personal information on it like name, address, phone number or any banking details. You don’t want your personal data to fall into the wrong hands.
3. Create a “Budget Binder” to Track Your Expenses
Creating a dedicated folder that houses your budget is a great way to start tracking all of your expenses. Tracking all of your deposits and deductions will give you indication of where you’re spending money. We recommend using a binder that can hold additional documents for unplanned bills or invoices like vet bills, kids’ sports registration documents or warranty information for electronics and furniture.
4. Use a Bill Payment Organizer So You Don’t Miss a Payment
Whether you organize your bills in order of importance, due date or by bill type, determine which bills you have coming due first to help you budget your finances. Use a binder or bill payment organizer to arrange the order of your bills physically even if they are automatically deducted. Seeing the physical progress of your payments will help you remember the monthly expenses that need to be accounted for.
5. Have a Separate Calendar to Plan for Billing Dates and Paydays
Create a dedicated calendar to help you budget when bills are due. Plot upcoming paydays to determine which funds you should use from which paychecks so that you allow yourself wiggle room between checks. Visualizing future bills and paydays will motivate you to stay on top of expenses.
6. Develop an Order for Which Bills to Pay Down First
Knowing which bills are most important to pay off first is an important part of the budgeting process. Ensuring you have a roof over your head and utilities to live comfortably is a crucial part of budgeting. We recommend prioritizing your bills in the following way:
Mortgage or rent
High-interest credit cards
Low-interest credit cards
Other bills or recurring payments
7. Take Time to Review your Finances and Upcoming Expenses
Set time aside each pay period (every two weeks) to review your finances and upcoming expenses and bills. Developing a routine with your finances will help you be prepared for what’s ahead and ensure there are no surprises in your financial future.
8. Determine if Automatic Deductions Fit Your Financial Plan
Automatic deductions and deposits can relieve a lot of stress surrounding billing due dates, but it also means you need to plan to have the necessary funds in your account each month. Going paperless can be very convenient, but it’s important to make sure it’s right for you.
9. Get Support From Someone You Can Count On
If you’re dedicated to investing in your financial future, take a weekend to declutter your finances. Ignorance is bliss--until your credit card gets declined or you realize you’ve spent your car payment during a shopping spree. Following these tips will prepare you for the future and lessen the uneasiness we all sometimes feel when our money isn’t in order. The best part is, you don’t have to do it alone! For more financial planning tips, speak with your local Farm Bureau Agent about ways to plan for and protect your future.