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5 Simple Points for Organising your Finances

5 Simple Points for Organising your Finances

5 Points to Organise your Finances

Effective financial management requires time and sacrifice. So, if you can adopt the mind set of taking care of your finances, your finances will then surely take care of you.

Decision-making is the direct influencer here. Understanding why you buy and what you buy, plus what gratification you get from it is important. These key decisions will directly influence your future. So, the earlier you begin planning how to spend your money, the kinds of debts you acquire, and how much you save, the better.

a financial advisor helping organise a clients finances

Let’s take a look at some steps to get you started on organising your finances:

1. Evaluate Your Financial Decisions

Firstly, you can’t organise your finances if you don’t know what drives you to spend. Here are some key questions you should be asking yourself:

  • Are your savings long-term?
  • Are you thinking about future retirement security? Or, is your entire savings plan geared towards the next holiday?
  • Do you have debt working for you in an investment plan? Or, are you using unsecured loans for self-gratification – for a new car or a new watch?
  • What influences your financial decisions the most, your own personal needs, your spouse, your kids, fun with your friends?

Most people fail to plan due to the impulse buying factor. They purchase items they don’t need – sign up for monthly memberships (like the gym) that incur automatic payments – but they never actually go to the gym. Understanding the social, physical, and emotional factors that influence your finances and decision-making is the first big step towards financial responsibility.

2. Get an Accordion Folder!

It’s not just about taxes and returns – accordion folders can be a great way to organize anything from your receipts, to your bills, and overall expenditure. It is especially useful if you want to keep a close eye on how much you spend. Also, when you have a well-organised system, you will be able to find important documents without having to turn your house upside down.

Accordion folders are also a good way to keep an account of what you spend, your own financial scorecard. Keeping all your important documents on-hand will allow you to see the kind of progress you’re making over the course of the year.

3. Get Your Debt In Check

Financial assistance can be a great resource, if you use it the right way. For example, using a payday loan or credit card to pay for things you don’t really need like the latest phone or a night out. Try to make decisions that actually make financial sense. Here’s some points to consider:

  • Check your overall debt and weigh it up against your Net income.
  • Ensure you don’t run up new charges.
  • Check your purchases – keep them within the 20% limit.
  • If it’s possible, try to get a second job, or overtime to supplement the lost income, but only if necessary.

Also, and perhaps more importantly, know the difference between good and bad debt.

  • Bad debt – Debt that you incur to purchase something that has no appreciative value. It will never cost more than what it costs when you buy it.
  • Good debt – Debt incurred and used as leverage towards improved value in future.

a young woman constructing her financial plan

4. Find Spending Leaks

The beauty of planning is identifying your problem areas. Once you have a clear view of how you spend, you’ll see a pattern of areas where the spending was frivolous – that’s a spending leak. Changing a few bad habits, once identified can save you a lot of money that you can re-direct to something more constructive.

5. Save and Invest!!

Lastly, it’s never too early to start saving and investing for the future. If you can find someone who is a specialist within managing finances, this could help you win some cool investment advice. Investing wisely can offer some great returns – you’ll need to do your research though!

This is not financial advice, by the way – but the S&P 500 is normally a solid go-to, especially for long-term investing. Making money short term while trading for quick wins requires a lot of knowledge and financial backing. However, the S&P 500’s average yearly returns over the last 10 years is over 14%. People like investment mogul Warren Buffet continuously advised to buy and hold this index fund.