Get Your Finances Organized in 12 Steps
Financial guru Gail Vaz-Oxlade and host of Til Debt Do Us Part shares 12 steps on getting your finances in order.
INITIAL SET-UP
- Gather all your paperwork. Create a file folder for each of the following:
- Chequing accounts
- Savings accounts
- Retirement accounts
- Investment accounts
- Credit card accounts
- Loans
- Personal lines of credit
- Mortgage
- Insurance (life, disability, health, critical illness, home, car)
- Estate (wills and powers of attorney)
- Tax returns
- Welcome to 21st-century banking. If you don’t already have it, set up telephone or internet banking for your accounts.
- Reduce fees by setting up a buffer. If you can afford it, transfer a $1,000 float to your chequing account (pretend it isn’t there) and use that to minimize your banking costs.
- Save automatically. Create an automatic withdrawal from your chequing account to a savings account that will not be touched. Most people won’t put money into a savings account on a regular basis and opt instead to wait for a tax refund or bonus before setting aside money for the future. Establish an automatic savings deposit every month and your nest egg will accumulate faster than you think. Opening an account under two names will require approval from each person for withdrawals. That way, you can keep each other in line.
- Create a monthly bill summary. List your bills according to when they need to be paid to keep from missing a bill. If you have bills that are paid automatically from your account, write an “A” beside these bills and remember to deduct them from your spending journal when you pay bills each month.
- Set up your in-baskets. Create an in-basket with two bills folders labelled “1–15” and “16–31.” When a bill comes in, look at the due date and put the bill in the appropriate folder. Recycle all the marketing crap in the envelope. Create a second in-basket with three folders labelled “bank statements,” “bills paid,” and “tax receipts.”
WEEKLY
- Make a date with your money.
Set aside time in your schedule on the 12th and 28th of each month to pay bills. You’ll need anywhere from 15 minutes to an hour, depending on your bills.
Designate one place in your home where you always pay your bills and keep it equipped with bill-paying supplies: your spending journal, envelopes, stamps, pens, pencils, a calculator, tape, a stapler, return address labels, and a recycling bin for all that junk mail you’re going to dump.
When you pay a bill, write the cheque or transaction number, the amount paid, and the date you paid it on the bill. Put the paid bill in your “bill’s paid” file. Deduct the amount you’ve spent from your spending journal. If a bill has not been paid in full (tax bills are paid over several months, for example) put it back in your bills folder so you don’t forget it.
MONTHLY
- Reconcile your bank statements. When your bank statements come in, put them in your in-box folder. Make a date when all your statements are in (it will depend on when you receive them) to:
a) Review your statements to make sure there are no mistakes.
b) Reconcile your spending journal. Clearly mark the cheques that have been returned to you and highlight the ones in your spending journal that haven’t yet cleared the bank. A cheque that takes a long time to clear the bank can lull you into thinking you have more money than you do. Go back at least one month to make sure all previous cheques have cleared.
c) Talk about anything unusual.
QUARTERLY
- Update your files. Once every quarter, file all your paperwork to keep your system current.
- Keep in touch. Have dinner with your business partner to talk about the bumps, your goals, and how you’re doing.
ANNUALLY
- Re-vamp your budget. Review your budget using last year’s credit card statements and bank statements to see what you actually spent. If you spent more on a particular category, make sure you know why or look for ways to trim.
- Clean up. Go through your files at the end of each year and throw out bills and receipts that are no longer needed for auditing/budgeting purposes.
Written by: Gail Vaz-Oxlade, host of Til Debt Do Us Part