7 Tips To Getting Your Finances Organized
Personal Finance can be overwhelming. I know, because for the last 10 years I’ve been helping people with their while shoveling through the new laws, tax codes, market commentaries etc. I meet a lot of people who look for introductory advice on personal finance… only to get lost in the soul crushing thought of organizing spreadsheets. So below, I’ll offer some basic direction that applies to most of the population. (Standard disclosure: This isn’t investment advice, and it’s not a personalized plan. However our company does provide those services, along with investment management, if you Schedule an Appointment). Without further ado:
1. Making priorities and the truth about money
There is one thing I tell every client family, regardless of age, income or life goals:
You can have anything you want, you just can’t have everything you want.
Getting organized financially can be overwhelming because people have a lot of goals and probably less money than they need to fund them all right now. Paying off debt, saving for a house, saving for retirement, saving for kids’ college expenses can seem overwhelming when you plan out the cost... However, making a list and identifying which goals are your priorities is the first step towards meeting any of them. Tackling goals by urgency, cost or emotional importance can all work, provided you stick with that plan once you start.
2. Take free money when possible
Can you imagine turning down a year-end bonus? While most financial literature rightly focuses on increasing saving and limiting expenses, don’t forget to add to your income where possible. If you work for a company that has a retirement plan, there’s a good chance they’ll have some sort of match- meaning they’ll put money into your account if you do. Regardless of your other investing opportunities, you should contribute enough to get the full match. Often times the match is an automatic 50%-100% return on your own contributions, and an important part of your benefits package.
3. Eliminate expensive debt
There’s good debt, ok debt, and bad debt. Most Americans would agree credit cards are bad debt. The interest rates are often over 20%, which is insane when most banks pay less that 1% on savings these days.
4. Double check your emergency plan
Rainy days, and rainy day savings are no fun. Neither is being a part of the 40% of Americans who can’t cover a surprise $600 expense. Make it a priority to set aside 3-6 months of your fixed monthly expenses to cover the unexpected. If saving chunks of money is difficult, look to one of the many “round up” apps that helps you save spare change on regular purchases.
5. (Ugh) Insurance
Insurance is one of the only things in life you buy with the intention not to use, but don’t forget about life insurance for your family’s earners. Term life can be incredibly inexpensive (I have a personal policy that costs about $20 per month for $500k in coverage). This benefit can help your family reduce debt, replace lost income and preserve a current lifestyle should the unthinkable happen.
6. Automate your savings
Use laziness to your advantage by setting up programs that help you pay yourself first.
Any time you can save money without thinking about it, you should. Workplace retirement plans are a great way to set aside for your future, as the money comes out of your check before you can touch it, and it’s invested automatically whenever you get paid. Keeping your savings plans simple usually beats elaborate plans that are forgotten, given up or executed poorly.
7. Leverage the experts
I’m not talking about your Uncle Buck, either. Most of our professional peers love to help where hey can. Questions you might have on taxes, estate issues, investing, gifting etc. might be second hand to someone in that line of work. Don’t be afraid to admit you have a couple questions. Many professionals in our area offer free first appointments, and will help steer you in the right direction, even if you don’t want to retain them.