It’s so exciting to be in a new year; no matter how badly the last year may have gone for you, the new year always brings with it, hope of better things’ a fresh start, a chance to do things better and yes, you should do things better, if you desire a change, then you need to restrategise.
So today, we’ll be looking at how to Organise your finances for the year.
Are your finances disorganized? Do you find yourself often looking for documents or missing due payments? Organising your finances can be a real chore. Every month, you receive several bills, statements, and other financial documents, which can be quite overwhelming.
Unpaid bills and statements from multiple bank accounts lying un-opened are a sure sign that you are losing control of your financial life. Perhaps you regularly miss payment deadlines and end up having to pay penalty fees or punitive interest because you just can’t keep up with all your financial matters.
Most of us badly need to go through this exercise, so this January, let’s try to create some order.
This might seem like a daunting task; where do you start, with envelopes, drawers, and cupboards full to the brim and overflowing with documents that you haven’t looked at for years. If you are disorganised, you could be putting your financial wellbeing at risk and it will be difficult to make progress. If you put your mind to it and devote some time to this task, you will make huge strides in sorting things out. What you may not know is that organizing your finances will contribute to your financial success this year. This topic is quite robust but we’ll try to cover as much of it as possible today.
So what tools do you need?
To get started you need to put a few things in place; your purchase list could include the following items; files and folders, A4 envelopes, a letter opener, stapler, a perforator, markers, biros and pencils, address labels, a calculator, a shredder and a small safe.
Create a simple filing system
To put your documents in order you need to carefully create a system that helps you to keep track of all the paperwork; a simple filing system is one way as there is a lot of important financial information that needs to be organised and maintained, some of it in physical form for a period of time. The categories usually include the following documents; bank statements, retirement account, other investment statements, brokerage and mutual fund statements, portfolio reports, insurance policies including those for your home, life, medical and health insurance, title documents for your home and your car, mortgage documents, tax returns, monthly bills, salary pay slips, warranties, title documents for home, car, receipts for significant items and so on. The list is endless
We all have some particularly important personal documents such as a passport, birth certificates, title documents, stock certificates, educational certificates or your marriage license; you need to scan or photocopy these documents for your household files. Ideally, the original documents should be stored in a sturdy fireproof filing cabinet or a small fireproof safe. List out all the contents and make copies to be kept with your lawyer or other reliable family member or friend. It is important to protect these from the risk of fire, flood or other disasters. You don’t need to go overboard in trying to create Fort Knox at home, but at the same time you shouldn’t have things lying around in cardboard boxes at the bottom of your wardrobe for an unscrupulous house keeper to rifle through whilst you are at work.
Setting up a basic filing system is one thing, maintaining it is another. Even if you are too busy to go over your money matters once a week, do try to revisit this most important aspect of your life periodically. Whenever you receive a bank statement, take a moment to check it for errors before you put away in the correctly labelled folder; that way your bills and important documents are easily accessible.
Do you own too many bank accounts?
How many bank accounts do you have and how many do you actually need and use regularly? If you have more than two bank accounts, you might consider closing down the ones you don’t really use unless the accounts play very specific roles. This is one way to feel organised.
Very important: Get a Shredder
Many Nigerians find themselves victims of fraud and identity theft, in which personal documents are stolen and the data is used fraudulently. Your financial information is very personal and it is essential that you maintain confidentiality to protect yourself from fraud. When your rubbish is picked up, you don’t know exactly where it ends up. Don’t just carelessly discard old financial statements; all those old bills, bank statements can become prime targets for thieves. Consider buying a shredder so that you can immediately shred any sensitive documents that you no longer need; this way you can minimise the chances of the wrong person getting at the information. With about N10,000 – N15,000 you can get a basic shredder to use at home.
Have you ever thought of organising your finances electronically?
The world now lives on the internet, so if you are comfortable with technology, and are fortunate enough to have access to it these days who doesn’t really? – one of the easiest ways to maintain your records, is to use technology and personal finance software.
Advances in personal finance software have made it possible for anyone with a computer and regular internet access to create budgets, pay routine bills, manage bank accounts, track every day finances, and monitor investments. Assuming you have already registered with your bank’s electronic banking facility and most of your regular transactions are handled electronically, you can take things even further. Microsoft’s Money and Quicken are just two of the more popular solutions. Worried, you don’t know how to work it? Well, the hardest part of organising anything, including your finances, is getting started. Take the trouble to learn the basics of your software by completing any online tutorials. If you do not make an effort at the onset, the experience will be tedious, which defeats the whole purpose of the exercise.
It can be a daunting task to set up all the relevant accounts, extract information and then input it on your personal finance software. Just as I mentioned earlier, we often have far too many accounts that we don’t need so this might be a good time to streamline your accounts. Start with your current account, and then set up accounts for your loans and investment accounts. Most personal finance programmes can be downloaded from the company’s website and are relatively easy to use, even for those who are not technology savvy.
As the leading software is usually compatible with the more common banking platforms, with the click of a mouse, you should be able to download your bank account and investment information directly which makes it much easier for you to reconcile your accounts. No matter how companies try to simplify the process, however, you cannot avoid having to input some account information manually.
Personal finance software can be a great tool for financial planning. You can print out reports that will help you analyse your income and expenses, and spending categories are often in place so that you can at a glance determine where your money is going. Most programmes include a budgeting tool, which even helps you track how well you are sticking to your budget.
Scan your documents
Are you swamped by paper? Paperwork consumes our offices and homes and our lives. All those paper bills and statements tend to pile up, and they need to be stored somewhere. One of the best ways to store and backup your data is to scan your critical personal and financial documents.
Invest in a document scanner. These days you have the option of buying an all-in-one printer which comes with a photocopier and scanner. with about N10,000 – N12,0000, you can get a small one to use at home. By scanning many of your sensitive documents and storing them on line or at least on a hard drive you can reclaim some of your space. Many smart phones have applications that you can use to scan documents using the integrated camera; some of these produce very good digital images. An electronic version will protect from fire, theft or other loss, is easily accessible and will also be legible long after ink has faded. It doesn’t take up any space, except on your computer hard drive or your flash drive.
Once you have made an electronic copy of the documents you wish to store, you will be more confident shredding the documents that you don’t need to keep to reduce the clutter. There are always critical financial documents that must be retained all your life in their original form for verification purposes; these include birth certificates, passports, insurance policies, title documents; these should be kept securely in a secure fire proof cabinet or safe but it is useful to retain scanned copies of these documents as well.
Don’t forget to back up regularly
It is not advisable to maintain your most sensitive financial documents on your personal computer or laptop, as saving all your data locally leaves you vulnerable to corrupt files and data loss, which can be very difficult or often impossible to retrieve. Even worse, as if you lose the device or it is stolen, hackers may gain access to your sensitive information and use it fraudulently. Store your documents on a removable USB storage device or on a CD as additional back up. It is a good idea to back up your hard drive and keep a copy of your data off site in a different location from your computer as an additional precaution.
Timing is everything! Avoid a backlog
Once you are organised, try to take some time if possible, weekly, or at least monthly…and if that’s hard to achieve, then at least quarterly in order to scan, file and shred documents. If you allow the documents to accumulate beyond this, it can become overwhelming. When you manage the process in smaller chunks you are less likely to become discouraged and leave things to pile up.
Most people have challenges making the transition from paper to technology. Over time, paper accumulates and can become a major organisational problem. By migrating from paper to electronic document storage you can save both time and space. Once you start organising your finances electronically, you will wonder how you ever coped without technology, and an added bonus is that it is good for the environment.
As you sort out the clutter and organise things, you will feel more organised and in charge and this will definitely translate into financial success. Start today!
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