When it comes to managing finances, organization is key.
The more accounts and loans you have, the more statements there are to review and easier it is to overlook charges, deadline, fees and mistakes.
“Budgeting and keeping track of expenses is important,” says certified public accountant Ernest Almonte. “It can lead to a lifetime of financial success. It provides financial freedom.”
Creating a system for paying bills keeps expenses on target and helps to meet financial goals. Joseph Montanaro, certified financial planner at USAA, suggests managing your budget in a spreadsheet or software package. “It’s critical that you keep it front and center,” he says.
From the best way to track your expenses to how to stay organized for tax season, here are expert tips on how to stay on track to meet your financial goals:
Step No. 1: Prepare a Budget
Breaking Down the SOTU and Your Finances
Get Your Spouse Involved in Finances
Talk is Cheap, Except When it Comes to Money and Marriage
Three Ways to Slash Your Medical Bills
How Birth Order can Affect Your Finances
Five Financial Goals Every Boomer Should Make
Five Tips for Refocusing on Financial Goals
How to Pay Down Debt
Retirements Survey Finds Many Tripping Over Financial Hurdles
Being aware of how much you spend is the first step to controlling your expenses.
“If people who don’t have a budget looked at where they spent money, they’d be appalled each month,” says chartered financial analyst Robert Stammers, director of Investor Education for the CFA Institute.
Before creating a budget, Almonte suggests reviewing last year’s expenses to identify any areas to cut back and what should be priority. If you didn’t stay within your means, adjust your budget for the next 12 months accordingly. He also recommends including short- and long-term goals in a budget and how to fund them.
Regardless of your expenses, experts suggest paying yourself first by automatically putting money away in an emergency fund, IRA deferred compensation plan or a regular savings account. “You just worked 40 hours and you need to take care of yourself first,” says Almonte.
Step No. 2: Put Your Budget into Action and Online
“Keep active with your budget,” says David Giancola, director for Merrill Edge. “You can’t just walk away from it; you have to keep track of it.” The more you are able to automate your spending with direct deposit and online bill pay, the more likely that you’ll stay on track, he says. Online bill pay can help you avoid late fees and maintain your credit.
Experts recommend revisiting your budget often and having a system to finance unplanned large purchases. If you’ve a partner, Giancola advises having regular conversations about finances to make it easier to achieve financial goals.
Couples should always confer with the other before making a big-ticket purchase and single shoppers should have a “cool off” period before spending big bucks, recommends Montanaro.
“Before you make a purchase above a certain threshold, wait a week. This will help you decide if you really want to spend your money on it.”
Step No. 3: Keep Accounts at One Bank
It’s a good idea to shop around for the bank with the best offers, customer service and reviews, but Giancola advises picking just one.
Most banks have great websites that make managing money easier and tracking credit card and savings statements.
Step No. 4: Review Insurance Policies
Experts recommend reviewing all your insurance policies annually or anytime you’ve a major life change like a marriage or new child, house or job.
Decide how much risk you can afford and your risk tolerance level, says Almonte. “Your emergency fund should be able to handle your deductibles so your budget won’t be thrown out of line.”
Evaluate your auto insurance periodically, suggests Stammers, to see if you qualify for a better rate. “Shop around to see if you can get reduced premiums for the same coverage.”
One way to save on premiums is to raise your deductibles, however, Montanaro cautions against this unless you’ve enough money in your emergency fund to cover the higher deductible.
Step No. 5: Fix Credit Report Mistakes
A new study from the Federal Trade Commission finds one in five consumers had an error on at least one of their three major credit reports, so it’s important to check your score to avoid long-term damage. After all, a good credit score can help you qualify for lower rates on credit cards, mortgages and auto loans.
“You can use it as a tool to lower your overall interest rates which can help save you money,” says Almonte. “You can apply those savings towards your own priorities.”
Credit reports can also affect your auto insurance, according to Stammers. “If you have bad credit, your auto insurance may be higher even though you’ve had no accidents or tickets.”
Step No. 6: Keep Important Papers in One Place
Consistency is important to stay on top of bills and budgeting, so find the system that works for you and stick with it.
To help keep your budget up to date, putting your receipts in a folder makes everything easy to find. Mechel Glass, vice president of community outreach at CredAbility, suggests keeping tax records for seven years, IRA contribution records permanently and brokerage trade receipts until the security’s sold. Be sure to ask your financial institution how long statements are online.
“Documents don’t arrive in one envelope-you get tax info arriving across a 30 to 40 day period,” says Giancola. He recommends keeping a folder for all tax documents so that you’re not hunting for receipts and W-2s when you’re ready to file.
By tracking your expenses, you’re less likely to miss any deductions on your tax returns for charitable donations, sales tax paid for a house or car and medical expenses, says Almonte. Paying less in taxes can provide you with more money to spend.