4 Steps To Start Organizing Your Finances

A Step-by-Step Guide to Organized Money Management

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Updated on July 12, 2021

Financial Goal Typed on Note Pad — Photo: Cn0ra / Getty Images

Living frugally means being in control of your finances, which can sometimes feel like a full-time job—especially when life gets busy. Who has time to do all the little things to save money, like clipping and using coupons, or finding ways to cut costs with do-it-yourself projects? Some of those personal finance "to-dos" often fall by the wayside.

But there are some simple ways you can organize your income and expenses in a way that contributes to your financial success. This four-step guide will help you to determine your net worth, set financial goals, track your spending, and create a budget.

Key Takeaways

To find out your net worth, add up assets such as cash or valuable property, then subtract liabilities such as credit card debt or student loans.
Identifying your financial goals will help you stay organized and create a clear plan for achieving them on a specific timeline.
You can track your spending by recording your expenses for a month or examining your bank statements from the previous months.
Create a budget by calculating your monthly income, then allocating that among your expenses in a way that allows you to work toward financial goals.

Determine Your Net Worth

Your net worth—the total of all your assets minus your liabilities—can tell you a lot about your current financial health, and it can also help you to plan for your financial future.

Your net worth is the cash you would pocket if you were to sell everything you own and pay off all your debts. If you take a hard, honest look and determine this simple figure, you can work backward to create a budget, set financial goals, track your spending, and, ultimately, take control of your finances.

When making your net-worth calculations, these items are considered assets:

Cash (savings and checking accounts)
Investments, including stocks, bonds, securities, and retirement accounts
Real estate equity
Vehicles
Art, jewelry, collector's items, and other valuable items

The following items are liabilities:

Credit card debt
Student-loan balance
Balance remaining on your mortgage or car loan
Any other debt

Add up the value of your assets, then add up the value of your liabilities. Subtract your liabilities from your assets; the number you get back is your net worth.

After finding out what your net worth is right now, get in the habit of recalculating it yearly or whenever there is a significant change to your finances.

Note

It might be tempting to skip this step, but determining your net worth may be one of the most important parts of organizing your finances.

Set Financial Goals

To get your finances in order, you first need to decide what you hope to accomplish. Do you want to save for your retirement, a vacation, your child's college education, a new car, or a house? Do you hope to pay off debt or build up an emergency fund? Spend some time identifying your financial goals—big and small—and put them on paper. Think about how you're going to reach those goals.

A financial plan can help you get ready for whatever that big expense is with minimal worry. If you take the time to plant the seeds for your future by creating a plan with clear goals and a specific timeline, you will reap the rewards years down the line.

Note

Don't forget—while it may seem like a good idea to direct all or most of your money toward accomplishing your specific goals, it's important to be realistic. You still have to account for everyday expenses and life's unexpected moments.

Track Your Spending

Do you know how much you spend each month? If not, now is the time to find out.

Whether you decide to pore over bank statements from the past few months or track your spending over a one-month period, knowing where your money goes can help paint a clear picture of your spending habits.

Are you spending too much on incidentals, such as coffee and vending machine snacks? Are you falling behind on your savings goals or spending more than you make? Looking at the hard numbers may show that small things really add up.

By the end of the month, you should have a better idea of where you're spending money and where you may be able to cut back.

Create a Budget

Once you have established a list of financial goals and have taken a close look at your spending habits, it's time to create a budget that reflects how you want to spend your money. To create an effective budget, start with a budget worksheet, where you'll gather all of your financial statements, record your sources of income, create a list of monthly expenses, and make adjustments to those expenses. Then, you'll want to learn how to budget your annual spending and break that down to develop a monthly spending plan.

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