Welcome to my series on Organizing Your Finances to Make Better Use of Your Time and Money!
In my last post, I talked about three reasons why it may make sense to reorganize your financial system – or to create one in the first place.
Today, I’m sharing five ways to get a better bang for your buck and your time. These strategies will pay off in the long run, but even better, they’ll net you significant wins this month.
Let’s dive right in.
1. Check All Accounts Daily
In fifteen years of working with families to help them strengthen their finances and fix challenges, the biggest issue to financial stability that I’ve seen is the amount of debt that families are carrying, which in turn boils down to overspending. Regardless of whether or not you have consumer debt, the following strategy will serve you well:
Every day, take ten minutes to log into all your accounts – chequing, savings, credit card, line of credit, and other loans – to look at the recent transactions and balances. By doing this you’ll accomplish the following:
- You’ll maintain an awareness of how much money you have to work with and how much you’re spending.
- It will be harder to delude yourself with thoughts like, “I really don’t spend that much,” when you’re staring at black and white line items. It’s impossible to argue with raw numbers.
- You’ll get ongoing reinforcement of what you spend and save on a daily basis.
- You’ll have daily reminders of why you’re saying no to purchases as you look at your debt balances.
- You may think twice about an impulse purchase if you’ve just looked at your credit card statement and realize you’ve already spent your allotted dollars for the month.
- You’ll be inspired when you start to crank up your savings. My Women’s Money Group members tell me all the time that they love watching their savings grow. This is a habit that I teach and reinforce constantly with my members.
Want to know what poses a significant threat to your finances?
Avoidance – avoiding the reality of what you owe or any other area that causes you stress. If you’re sweeping information under the metaphorical rug, know that that stress is multiplying like bunnies under the surface, and it will come back to hurt you.
Paying regular attention to all the details of your finances is one of the simplest and most powerful strategies you can implement.
In this case, frequency (i.e. repeated, short bursts) beats intensity (i.e. doing a marathon session of dealing with your finances) hands down.
2. Automate Bill Payments
What’s the number one behavior that will harm your credit score?
It’s not having too much debt – though that certainly matters.
It’s paying bills late. If your payment isn’t received by the due date, it gets reported as a late payment to the credit reporting agencies. such as Equifax and TransUnion.
It doesn’t matter when you made the payment; what matters is when the lender receives the payment, which is why you should plan to make payments one week before the due dates to allow for funds to be transferred from your bank to the service provider.
If you can fog a mirror, you will probably end up missing a due date at some point. Why? Because you’re human. You get busy, ignore electronic reminders, go away on holiday and check out mentally for a bit – and next thing you know, you missed the hydro bill or a credit card payment. Guilty as charged, before I instituted this strategy – and I think about this stuff every day! It happens.
The simplest way to avoid that and to avoid incurring late fees or additional interest charges is to automate all bill payments.
By automate, I mean setting up automatic payments that pay the full balance or a preset amount every month with you having to lift a finger. You may not remember that your credit card bill is due on the 24th, but your automated payment system will.
For most credit cards, that means logging in and filling out a form to authorize them to pull the payment – either the balance in full, the minimum amount due, or a preset amount – from your chequing account.
CAUTION: Automating payments is a powerful strategy, however it can lead to a lack of oversight if you don’t make time to review all your bills.
Results from behavioral science make it clear that you need to make your spending visible to avoid over-spending.
At my next Women’s Money Group Workshop on Organizing Your Finances, I’ll show you why making your spending visible is so important and how to incorporate that step into your financial system.
3. Automate Your Savings
Most of the clients I’ve worked with had difficulty saving money before we started working together for one simple reason: They did not make it a priority.
The meant to save money; they wanted to save money; they had it on their “I should” list; but they never managed it.
Here’s why: It was always the last thing they paid attention to on a long list of “things to do with my money”.
When you spend first and save later, savings don’t happen.
Saving money simply can’t compete with the long list of temptations for us to spend money.
If you want to grow your savings, don’t fight psychology; work with it. Start by saving money, then spend.
Create automatic transfers from your chequing account the second your earnings come in. When your salary or pay cheque comes into your account, automatically send a chunk of that money straight into your savings account.
Want an advanced strategy? Hold your savings at a separate bank so that you do not see the money. It will simply disappear from your chequing account and populate your savings outside of your immediate visible range. You definitely will see the growing balance when you check your accounts every day, but you won’t be tempted to spend it when you look into your chequing account and see only the funds that are there for the purpose of spending.
4. Spend Only on Your Values
You know how many personal finance writers recommend only shopping with a list? I’m going to take it one step further: Create a values list to guide your spending. Chop out all spending that is not in line with your values list.
Net effect = instant savings.
What do I mean by values list? I’m referring to the things that matter most to you, in order of importance. Drill down on the areas, experiences, and things that you value deeply and prioritize them. If financial security or financial freedom shows up high on your list (note – they are different concepts with different mindset underpinnings), then saving money and paying off corrosive debt will probably be a priority for you, making it easy to say not to a mindless drive-thru that you do habitually.
If having a great family vacation every year is high on the list, then it’s easy to have a conversation with kids when they’re asking to buy the super fabulous toy at Costco: “I see that toy and it sure would be fun to have, but we have to make choices with our dollars. Which would you rather have, that toy or a fun holiday this summer? Right now, we’re putting extra dollars into a savings account to pay for a holiday at [insert location]. What do you think? Which would be more fun?”
We used this strategy with our girls when we first moved into our house in the suburbs. We have a large back yard and our kids wanted us to put in a pool. My husband and I did the math on what it would cost to install and maintain, then we presented that to our girls. We gave them a choice: We can look at putting in a pool, or we can use those dollars to have great vacations every summer for five years. Which would they value more?
When they asked why we couldn’t have both, we talked about our values and the importance of using extra dollars to build savings and investments. We showed them how we save money to have fun holidays every summer and how installing a pool would affect those savings. When the girls realized putting in a pool would mean giving up many of the sorts of trips they value, they quickly presented arguments against having a pool! It was a fun exercise that made them realize the kinds of choices we make with our money.
One of my Women’s Money Group members uses this approach all the time as she’s shopping, reminding herself and her kids of her values before making purchases. She said the following about this strategy, “It’s so freeing!”
It makes decisions so much easier: Either the purchase is in line with your value-based goals or it’s not.
5. Create a Money Map
One of the fastest ways to get a sense of whether or not your money is pulling its weight in your life is to draw out a money map.
This is an exercise I’m going to do at my next Women’s Money Group workshop on June 30th. Here’s the gist:
- Pull out a piece of paper
- In the top left-hand corner, write the source(s) of your income in a rectangle – job, business, side-gig, etc.
- Using arrows and more rectangles, draw out what happens from there. Does the money go into a chequing account? Savings account? Investment account?
- How do you use your money once it’s in your accounts? Draw that out – e.g. purchase essentials, discretionary spending, paying down debt, building savings or investments, etc
- When you shop, do you get receipts? Where do they go? Draw that out.
- When bills come in, do they do so electronically or by mail? What do you do with them? What’s the process of paying bills?
- Where do you store all your information? When and how does that happen?
- When do you review your finances? Is that baked into your system or does it happen when you have time, on an as-needed basis?
You should end up with a picture that shows the flow of money in and out of your life as well as a representation of the system you use to organize your financial information. It will give you a quick overview of how well your money is serving you and where you can make changes to save both time and money.
If you like what you see on your map, carry on.
If you don’t, you can pivot and make changes immediately to get better results.
I’ll show you how
These are just a few of the strategies and tips that I’m going to share at my next workshop – Organize Your Finances: Best Tools, Tips, and Strategies for Your Time and Money.
My goal is to help you create a simple system that a) works for you given your lifestyle and personality; b) avoids wasting time; c) makes the best use of your money possible given your values; and d) makes use of psychology and behavioral science to ensure that you don’t fall prey to biases and harmful behaviors.
You don’t need to be a Women’s Money Group member to participate in next Tuesday’s workshop. Click here to grab a spot.
Either way, give the above strategies a shot and leave a comment below to share your results.
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