Lack of organization can harm your finances as much or more than being short on cash. Losing bills can lead to late fees, and not keeping track of your checking account could cause overdraft fees. The following is a list of steps that will help you stay on top of your bills and accounts and will lead to greater organization and, most importantly, less spending.
1. Pull out Your Budget at Least Once per Month
Your bills could change on a monthly basis. Revise your budget as bills come in and adjust other expenses to make up for it, so you don't accidentally overdraw your bank account. For instance, some months and seasons bring higher electrical bills than others. Let's say your electric bill is a $100 more in June than it was in May. Your budget may be based on spring electricity usage or the usage from a month where you had a lower electric bill. Since June's electric bill signals a change in expenses, you take out your monthly budget to see what other areas of your budget you could adjust so you can pay your electric bill.
To save $100, you exchange two dinners out for a bike ride with a packed lunch. You might also grab self-made or deli-made sandwiches to bring to a concert in the park instead of going out for pricey drinks. The best part about having to cut down on one expense to pay for another is it will force you to break traditions and try something different.
What if you don't have a budget? Create one today! Start by writing down your budget the way you'd like your expenses to unfold. At the end of the month, start tweaking your budget by adjusting other expenses when one expense is more than you expected.
2. Use Financial Software
Financial software isn't just for investments. You can find free, scaled-down financial software online to help you keep track of your daily and household expenses. Within the programs, you can get detailed information as to where your money is actually going. When choosing budgeting software, verify on the Better Business Bureau website that the program you're considering has good customer service records.
3. Keep Bills in One Place
Even if most of your bills arrive electronically, you still need a place for those that come by mail. And yes, some still do: Homeowners may not get property tax or homeowners insurance bills electronically because these bills are paid on an annual basis, for example. For storage, keep your bills near your desk or wherever you normally write checks or pay bills online. Invest in a simple file cabinet or file folder, and get the folders to go with it.
Given that most credit card statements and financial accounts are available online many folks throw out bills once they are paid, preferably after shredding them for privacy and identity theft protection. But if you prefer to keep paper records for tax purposes or just for security, file all these statements, bills and receipts into the filing system you just bought. If you don't like filing bills by hand, you can keep scanned copies in your computer, stored in an appropriately labeled folder.
4. Pay Bills the Same Day You Receive Them
Pay extra attention to paper bills that normally come electronically. You don't want to pay a bill twice because you received a duplicate by mail. Always call your creditor when a paper bill arrives when you think you have an automatic payment scheduled or electronic billing set up.
(For more, see Automating Your Bill Payments.)
5. Have a Checklist for Bills You Are Expecting
Neither mail nor email is perfect. Create a checklist at the beginning of the month with every bill you are expecting. You can keep it on your desk, bill-paying area or create a file on your computer.
6. Consult with Anyone with Whom You Share Accounts
Whether it's your spouse, significant other or relative, you can easily bounce a check or debit card payment if you don't know how much the other has been spending. Say your spouse has the day off and decides to go to lunch and golfing with a buddy. When you get home, you're told about a great game of golf. What you're not told is the $150 spent amid day-off festivities, and a direct-debited student loan payment bounced because your bank account had $100 less in it than you thought.
(To learn more, see Teaching Your Partner About Household Finances.)
7. Verify that Your Paycheck is Direct Deposited
If you have direct deposit, you get used to your paycheck being there on paydays. However, sometimes your check may not arrive electronically on the correct date. Don't start spending your paycheck until you've checked your account balance.
8. Have Two Bank Accounts
Use one account for discretionary spending and saving, and the other for paying bills. This way you can prevent yourself from accidentally spending bill money on a night out that should have gone towards rent.
The Bottom Line
Missing bill payments because of lack of organization is the easiest financial problem to fix. You don't have to use all eight of these tips, as long as you pick an organizational system that you can stick to every month.