How to organize your finances.

If your new to this or just overwhelmed by your finances, here are some tips on how to organize them.

Bank Accounts

The first thing to do is to set up a few bank accounts. Most basically, you will need a checking account for spending and high interest savings accounts for savings.

I worked with a financial advisor for a while who recommended I use an online bank that uses “buckets” to organize your money. I’ve been able to do that same thing not using the bank she recommended by utilizing direct deposit.

This could change if I decide it’s not working, but right now the majority of my check goes into my checking account for bills and life spending, and the remainder goes into my high interest savings account. The difference between a normal savings account and a high interest savings account is just that - the later calculates a higher interest rate that is paid to you each month. At the time of this writing, a normal savings account interest is around 0.46% whereas a high interest savings account interest is at 4.3%, almost 10 times higher!

I have two high interest savings accounts; a general savings for an emergency fund and a specific goal savings account, which right now is for the Camino de Santiago. I’ll talk about my goals more in a later post, but walking the Camino is one of my goals and so that’s what I’m saving for right now.

An emergency fund is so important to have in case something unexpected happens, like losing your job or your car breaks down or something. Typically, you should have at least 3 months worth of bare minimum monthly expenses in your emergency fund. For example, if all your living expenses, the minimum for all your credit cards, and your food expenses are $3000.00 per month, you should have $9000.00 in your emergency savings account. More is always better.

If you struggle with savings, set up automatic payments to yourself into at least your emergency fund savings account so that you both don’t have to think about it and you don’t see the money in the first place so it doesn’t feel like you’re depriving yourself now by putting money into your savings. Like I said, I use direct deposit to do this.

You can have as many accounts as you want to help you organize, but I would recommend this as the basics.

Bills

“Can you pay my bills? Can you pay my telephone bills?” - Destiney’s Child

The most obvious advice here is to set up automatic payments, which can be beneficial. If you get a decreased monthly payment for setting up autopay or you just know you’re not going to remember all your bills, definitely do it. I have autopay set up for some of my bills, but for my debts I don’t have autopay set up.

This is because, for one, I know I’ll remember them. But for two, I pay a different amount each month. This is either because the amount due changes, like when you start paying down a credit card and the minimum changes, or because I’m paying over the minimum and that amount changes each month.

But remember, your credit will ding if you don’t pay your bills on time, your interest rate will go up, and you’ll probably get a late fee. So, if set it and regret it is what you need to do then do it.

Budget

I use a spreadsheet with a few tabs to organize my budget, debt paydown plan, and savings plan.

The thing about budgets is that you have to actually check it for it to be effective. If you don’t think you will remember to check your budget, put the due dates of bills that aren’t on autopay (or even that are) in your calendar as an event so that you’ll get the alert.

Typical advice tends to say you shouldn’t budget in any amount for living your life. Frankly, if you like to be burned out and hate everything, take this advice. However, if you want to enjoy being alive at all, I would recommend still getting a latte or avocado toast when the mood strikes. Of course, it’s important to live within the allocated amount, but there should be an amount.

There is much more to say about budgeting. In an upcoming post, I’ll be reviewing Rich Bitch, by Nicole Lapin, where I’ll be explaining her budget breakdown. Spoiler alert: I love this book.

Talk soon, Madeleine