Adulting is out of fashion right now. We're supposed to be eating cereal for dinner, just as soon as we finish putting on our pajamas and coloring. The last thing that sounds fun is to ORGANIZE OUR FINANCES. You know what is fun, though? Having money is fun, because money is power and money is freedom. Take charge of your money and you can buy all the cereal, pajamas, and coloring books you want! It's not nearly as complicated as it sounds.
Money is power, money is freedom, and money is also information. It all starts with knowing where you stand financially. That happens when we consolidate all our information in one place. When we start treating money seriously, as a wonderful tool, we become more aware of the way it flows through our lives. How much is coming in? How much is going out? Where is it going, and why? Am I keeping any of it, or does someone else have it all now? When we're not in a place of financial clarity, the idea of knowing how much we owe and how much we're spending can feel like ripping off an emotional band-aid. Remaining in a place of vagueness, confusion, dread, or boredom is a guaranteed way to continue to have money worries.
My clients universally always have coins scattered around their homes and vehicles. Sometimes bills, too. They also universally always have expired checks that were never cashed, expired gift cards, and expired coupons. This kind of clutter creates an odd illusion, that of being surrounded by financial vehicles, while in reality being perpetually broke. My clients are such bright people, I can always clearly see ways for them to increase their earning power. Yet they are stymied by chronic disorganization. There are two areas where my disorganized people need to create systems: choosing a designated spot to keep important money-related things, and having a routine for when they come home every day.
What are money-related things? Your wallet. Cash. Coins. Checks. Checkbooks and check registers. Bank statements. Bills. Stamps, pens, and envelopes for paying bills. Gift cards. Coupons (although please, please don't waste your life clipping coupons). Tax documents. Receipts. A current calendar. Anything related to earning money, such as an appointment book, business cards, marketing materials, and especially your phone. Anything that is not one of these items should be stored somewhere else. Don't mix in non-money stuff with the money stuff. It's too confusing.
What about the homecoming routine? Just like everyone else, my people come in the door carrying a bunch of stuff. Wallet, keys, phone, coffee mug, jacket or sweater, bags of takeout or groceries, possibly dry cleaning, and, of course, MAIL. This is one of the top three areas of chronic disorganization. We're stressed out, we're tired, we're overwhelmed, and 80% or more of our mail is junk. Yet we still have to sort it. Almost always, it goes in a pile, and the important stuff is quickly buried under the irrelevant garbage that someone else maliciously sent to our house. Ye gads, do I ever hate junk mail, scourge of our era. Junk mail is completely unfair. It's the main reason why so many of us can't find those checks we were going to deposit.
I have some unconventional ideas about finances. One of them is that you don't have to balance your checkbook. I suspect most people don't do it. If the difficulty of sitting down and balancing a checkbook against your bank statement, on paper, is holding you back from taking charge of your financial life, then let that go for a while. It's antiquated and it's simply too difficult for a lot of people. I don't even USE checks, and I haven't used a paper bank statement in maybe ten years. I track my entire financial life digitally. All those numbers are accessible from my phone, where I can check them within seconds. I can tell you within $100 (without looking) how much is in my investment accounts and how much is in my debit account. The goal is not "do a bunch of complicated things on paper and give myself a headache." The goal is "know how much money I have and make sure I don't incur fines or fees."
My people typically tend to be paranoid about digitizing their finances. I have no idea why that is. I used to feel the same way back in the early 90s. At some point, I changed my mind. I have never once had a problem with direct deposit or electronic billing, not in twenty years. On the contrary. I receive automatic alerts every time a charge hits any of my accounts, and I can examine or dispute them on the spot. It is SO EASY. I can scan checks and deposit them from my phone, while plonked on my couch. Why on earth would anyone conduct financial transactions on paper anymore?
As we're consolidating and organizing the physical tools related to money, we can start organizing the information. The ultimate goal is a financial statement that shows everything you have and everything you owe. This is precisely like a "before" photo or a starting weigh-in, which means immense resistance, dread, reluctance, and sometimes sobbing. It's okay. We can't get anywhere without data. Reality, the world as it is. If the numbers are really scary, that's all the more reason to take charge and do something about it.
Step One: Make a complete list of every bank account, credit card, and lender. In my case, that would be my personal checking and savings accounts, our household checking account, two IRAs (different types), my student loan, my PayPal account, and three credit cards, two of which I never use and the good one that earns hotel points.
Step Two: Look at the balance for each account. If you're still working on paper, write them all down in a list. When I was super-broke, right after college graduation, I kept all this on a spreadsheet that I obsessively checked every day. At that time, I also had a car loan, a second student loan, and three personal loans that I have since paid off.
Step Three is to calculate your monthly nut, or how much it costs to be you if you don't buy anything cool. Rent, electricity, cable, phone, car, etc. That can take longer to figure out, though, if you're still sorting through depressing snowdrifts of junk mail and finding past due statements or pink envelopes. For now, we're just trying to get organized.
It's hard to believe right now, but I promise, if your financial situation is making you cry, it won't be that way forever. Getting clarity is how you get out. I mean, if you become a millionaire one day, you'll have to know how much is in all your accounts before you figure out that HEY, you're a millionaire!
I've been working with chronic disorganization, squalor, and hoarding for over 20 years. I'm also a marathon runner who was diagnosed with fibromyalgia and thyroid disease 17 years ago.