4 steps to lifting financial burdens
By Briana Stewart, utahvalley360.com
Getting organized with your money has always been a favorite New Year’s resolution. In fact, it may only be second to losing that last five pounds. But successful money management has its own kind of weight loss. It reduces stress, provides control and ultimately lightens the load of financial burdens.
Despite best intentions, people carry around that extra “financial weight” year after year.
“There are three reasons people put off managing their finances,” says Brad Norton, vice president of marketing/business development at Utah Community Credit Union. “The first is they are too busy, the second is it seems to be too difficult and the third is they just don’t know how.”
For others, ignorance is bliss.
“Denial can be a factor as well,” Brad says. “People think, ‘If I don’t look at it, I don’t get discouraged.’”
Fortunately, there’s plenty to be encouraged about. With simple filing systems and user-friendly software, getting your money in order has never been easier. Here are four steps to help you face your finances and start off the New Year a little lighter.
1. Picture Time
Before you dive into spreadsheets and debt reduction plans, it’s important to evaluate your current situation.
“Take a snapshot of where you are in your finances,” Brad says. “Where is your money going? What did you spend it on last month?”
Without a financial notebook, answers to such questions can be difficult. It’s hard to remember everything you bought yesterday, let alone last month. But that financial log is the key to being aware of your expenses and eventually formulating a budget. It sheds light on where you’ve been and where you want to end up.
“It’s similar to Stephen Covey’s theory of putting the big rocks in first,” Brad says. “You start with the end in mind.”
That “end” may be easy to determine, but the steps to get there can be overwhelming. The secret is finding a system that’s right for you.
2. Shopping For A System
There are a variety of money-management programs that have worked over the years, but finding the right system is about matching your style. Here are just a few possibilities.
Programs like Quicken and Microsoft Money help you to electronically keep track of your expenses. You can balance your checkbook, monitor and schedule bills, generate reports and more easily observe where you’re doing your spending.
Accounting software is helpful and generally easy to use.
The envelope budgeting system is a cash-based method. You take the net amount of your paychecks for the month and then determine where the money will be spent. After creating a list of categories (such as food, utilities or periodic spending), you designate the amount of cash each category receives and then place it into a labeled paper envelope.
This system allows you to know how much money you spend in each area and how long it lasts.
Online banking is a great way to match your personal records with the bank, but Brad says a new major trend in online banking is budgeting. This way you can keep track of your finances and manage a budget in the same place, at the same time.
For example, Mvelopes Personal, which is based out of Draper, is an online version of the traditional envelopes budgeting method. It allows you to create a spending plan and allocate money to your designated categories without the hassle of cash or envelopes. Because the program is Internet based, you can access your account anywhere and pay bills online.
3. Plan For Now And Later
Once you have a money management system in place, it’s important to think about its short and long term effects.
“Savings, retirement and a debt reduction plan are three things that are overlooked,” Brad says. “Before you can execute a plan, it’s important you understand these three areas.”
For savings accounts, Brad says there’s never too much of a good thing.
“We suggest that people have as many savings accounts as they need,” he says. “If you need 12 savings accounts to manage all your expenditures, we encourage that.”
For retirement and debt reduction plans, there are online, do-it-yourself calculators that are user-friendly and helpful in getting prepared. Software programs are available to the general public on UCCU’s Web site and are free for card members. Brad also suggests visiting a financial adviser to help you establish goals and steps to achieve them.
“As you choose to make changes in the way you manage your money, aggressive savings and debt reduction plans usually put the squeeze on variable expenses which helps to force or require modest family spending,” Brad says.
After you’ve settled on a system that works for you, the tricky part is sticking with it.
“Discipline is the hard one,” Brad says. “Once you know you want to make changes, where do you get discipline?”
The best option is instilling discipline into your plan. No system will work if it’s not used regularly and efficiently, so it’s important to spend time now so you can save time – and money – later.
“It does take time to set things up,” Brad says, “but with time and focus you can make some minor changes in the New Year that will benefit you for years to come.”
QUICK TIPS TO FINANCIAL ORGANIZATION
1. Create a filing system.
Nothing fancy is required. In fact, a basic filing cabinet with hanging folders works best. Then create a file for each bill or bank account.
2. Don’t let the mail pile up.
Go through the mail daily and file everything you need. This prevents things from getting lost.
3. Pay bills on the same day.
Create an “unpaid bills” file where you can keep your outstanding bills. Then pay them once every two weeks – preferably on pay day.
Source: Scott Bilker’s “Steps to Get Organized for Financial Success.”