9 Steps to a Financially Organised Life

Are you financially well organised?

Financial organisation has different meanings for different people which is understandable given we all have different financial circumstances.

For some of us, it might mean having a budget in place and ensuring we pay our bills on time. For others, it might mean we’ve hunted down the best mortgage rate and are utilising our offset account to reduce the interest we pay. Or perhaps it’s ensuring we have the right insurances in place to protect our family and our assets.

My point here is there are several ways to interpret financial organisation – and whilst we may have certain aspects of our finances well and truly sorted, it’s likely we are all a little ‘dis-organised’ when it comes to some other areas of our finances.

Just like we all have that one (or two in my case) ‘chuck and shut’ cupboards at home, there’s always something on our financial ‘to do’ list that never seems to make it far enough up the list of priorities to actually get done.

So how do we get to the point where we can confidently nod a ‘yes’ to being financially well organised?

If the meaning of being financially organised entails everything from having a well organised desk drawer to ensuring you have an estate plan in place (and everything in between) – that sounds like a lot of hard work.

So let’s break it down. If we agreed being financially well organised meant looking at our finances as a whole and devising some sort of plan to ensure that nothing is being overlooked; then the accompanying checklist for that plan might look something like this:

Review your system

Don’t have one? It’s probably time to get one in place then. You need to be easily able to pull out your most important financial documents when you need them if you’re going to be organised.  The easiest place to start is to create a filing system. This doesn’t have to be elaborate – there’s no need to invest your life savings into the entire Martha Stewart home office collection. It only needs to be as functional as you need it to be.

If you keep electronic records (like bank statements for example), no need to create hard copies, just a secure soft copy on an external hard drive you can access easily. There will always be documents you need to keep in hard copy though; in their case, you might like to keep a separate file for each of the following documents:

Bank statements

Credit card statements

Investment statements

Insurance policies

Superannuation statements & paperwork

Tax returns

Wills

It’s also a good idea to keep a copy of your will somewhere secure with a third party like your solicitor or a bank deposit box for example.

Review your current financial position:

Becoming a better, more organised money manager requires us to have an understanding of the details of our current financial situation.

I don’t mean being able to recall off the top of your head the total return of your super fund last quarter, but having an understanding of your overall financial picture is important. What you own, what you owe, where you are now compared with where you want to be.

A great way to do this is to create a balance sheet for your family finances. This will give you a one page snapshot summary of all your assets and liabilities and a net worth figure which you can update and use to track your progress.

Look at your bank accounts to ensure you’re not paying any unnecessary account fees. Perhaps you have an inactive account you could close (which will reduce your paperwork) or maybe you have an account with a small balance that could be closed off altogether?

Check to see if your savings are in a high interest savings account – if not, they might be missing out on additional interest.

Understand your cashflow

You need to tell your money what to do or it will leave (and leave you wondering where it went)!

If you don’t already have one – create a budget and review it regularly. Circumstances change regularly and our budget should change just as often with them. A quick review once a month is a great place to start.

Use your budget to determine what your net cash flow position is each month. If there is a surplus, you could consider setting up an automatic savings plan.

Is the payment of your expenses largely automated or are you manually paying your bills each month? There is no right or wrong way to structure your accounts and your cashflow, but if you are having difficulty paying bills as they fall due and incurring late payment fees, a little automation and re-structuring can take the stress out of paying your expenses on time.

Instead of using one account for all of your income and expenses – consider having a separate account for your bills. Use your budget to work out what your bills equate to each month and then transfer this amount to that bills account each month.

This way, you can be sure you will have enough money to pay these expenses each month as they fall due.  You might consider going one step further and automating payment of your expenses either by direct debit or credit card to prevent late payment fees. 

Review your expenses

This is an important part of being organised with your money. A set and forget approach to personal expenses will more often than not mean you are paying more than you should be. For most of us the trigger for a review will be once we receive the account in the mail, but for the frugal amongst us the thrill of the hunt for a better deal is sport and front of mind throughout the year.

Utilities and household expenses are very competitive markets and there are always opportunities for savings. By shopping around for your electricity, gas, phone, internet, household and car insurances and subscription expenses (like Foxtel/Gym etc) you will likely generate additional savings. No time? There are several comparison websites out there these days (like iSelect for example) which allow you to compare multiple providers against each other very quickly. If you are short on time, this quick step might be all you need.

By regularly reviewing the amount you pay for these expenses, you are effectively also reviewing your usage or the coverage they provide. Do you need more / less? Are you adequately covered?

A review of these aspects of your expenses might also generate additional savings if you end up adjusting the amount of cover you need. 

Lastly, some insurers will offer a discount for bundling together policies such as home, contents, car and other insurances and many insurers are receptive to competitive quotes so it’s definitely worth picking up the phone and making a call. 

Prepare for the unexpected

It’s important to know your plan B if you run into cashflow difficulties. Aside from relevant insurances, having some money saved to help you through difficult or unexpected circumstances can take the additional stress and anxiety out of the situation. In the worst case scenario, it can mean the difference between being able to get on with things or not.

You will often hear people refer to the idea of savings for the unexpected as an emergency fund. While most of us would associate this with maybe a major health scare or a job loss, there are often other circumstances not associated with the typical definition of an ‘emergency’ that can be just as significant financially.

Take a bigger than expected tax bill. Running a small business from home, it’s easy to take your finger off the pulse when it comes to preparing for your tax obligations at year end. But to small business, an unexpected tax bill can be a large financial concern. Whilst using credit may be an option for some, this will only delay the repayment of the debt.

What about unexpected car repairs? I think the majority of us can relate to this one. You take your car in for a routine service and at lunch time you receive a call with an estimate of $700 worth of necessary fixes.

The struggle is real and preparing for the unexpected can leave you with somewhat of a smile on your face.

Insurances

When was the last time you reviewed your health, general or personal insurances? Do your policies meet your current needs and circumstances?

Emergencies, accidents and other unforeseen events can cripple cash flow, your ability to generate an income and worst case scenario, leave your family struggling financially without you or a loved one.

Whilst being organised with insurances can be cumbersome and time-consuming, the financial security they provide is invaluable.

It’s also important to be understand your policy and be aware of the features and benefits so you can maximise the benefits provided by your policy should you have a need to claim.

For example, did you know that some life insurance policies allow you to increase your cover amount without additional medical or personal assessment, following specific life events such as marriage or the birth of a child?

It pays to be organised when it comes to your insurances; knowing exactly what you are covered for and in what circumstances can mean that you are not spending your savings unnecessarily.

A great tip is to create a quick reference guide (one page) which simply lists your policy and policy number (handy as a quick reference when enquiring on your policy), and then the amounts you are covered for, and any policy excesses. This gives you a snapshot which is easier to review more regularly.

Going one step further, you may want to even print off the relevant pages of the Product Disclosure Statement that lists the features and benefits of your specific policy that you can refer to easily when needed. Of course these may change so it’s important to always refer to the actual policy document to ensure you’re still adequately covered.

Debts

If you have credit card debt look to see what interest rate you are paying & compare. It may be possible to transfer the balance on your card to a new card with an introductory interest free period. This will allow you to focus on paying down the debt rather than purely servicing the debt with interest payments. You could also consider setting up an automatic payment to your card from your bank account to ensure the debt is being repaid.

Do you have more than one personal loan or credit card that you are having difficulty in managing? It might pay to look at consolidating your debts, however you need to make sure this is the most cost effective option for you by speaking with your broker or bank as it will depend upon the individual credit products and the applicable interest rates.

Increased competition between mortgage lenders means there could be advantages in reviewing your mortgage on a regular basis. It’s important to review mortgage options beyond a cheaper interest rate though, and discuss with your lender or broker fixed and variable rate options, features like re draw facilities and the ability to make additional payments which can all impact your ability to pay your loan down faster and save on interest. 

Superannuation

Superannuation is often the most forgotten about personal asset there is! Classic case of out of sight out of mind. But the financial impact of being a little more organised in this department can be significant over a 20, 30 or 40 year period!

Some points to consider:

Have you nominated an investment fund or are your funds invested in the default investment option? Having your funds invested in line with your risk profile can provide you with risk appropriate returns over your investment period and help you meet your goals.

Have you nominated a beneficiary for your funds? Many people are not aware that superannuation is not an estate asset. This means that upon death, it does not automatically form part of your estate.

As mums our superannuation suffers when we take time out of the work force to raise our children. Making small contributions yourself from the family budget or even splitting contributions with your spouse are two ways to keep your super balance growing over this period.

Do you have more than one super account? Consolidating your accounts can save you time and money in the long run. Before you do, it’s wise to investigate any insurances you may have through super, which you may lose by closing your account.

Estate planning

Having a will, power of attorney and guardianship arrangements for our children are important aspects of being organised in this department. Many of us mistakenly believe that we aren’t ‘wealthy’ enough to be concerned with estate planning.

If we don’t believe we have sufficient assets to warrant the expense of preparing these documents, how much money do we need to have before we feel the necessity kick in?

The reality for the majority of us is that we have a primary place of residence with associated mortgage debt and dependent children. Even if we have no mortgage, we may have investment properties (with associated debt), shares, superannuation assets and other outstanding loans (credit, personal, business etc). Wealthy or not, we have financial affairs that warrant some instruction.

The simplest way to be organised in this department is to seek the advice of a professional and then to review the arrangements made regularly to ensure they remain in line with your circumstances.

If you’ve read this far – congratulations! You’re well on your way to being financially organised. While this list is by no means covers every aspect of each of the above areas – my hope is that it will provide you with a useful starting point on your journey to more organised financial affairs.

Rebecca is a work from home, full time mum. She works together with her father in his wholesale carpet business. She also runs a blog which aims to inspire mums everywhere to confidently pursue better money management skills. A dip in the ocean, a spot of yoga, good coffee and beach time with her family is what fills up the rest of her spare time. You can check out her blog at www.thefiscalmum.com   

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