How to Organize Your Personal Finances

Successful money management is all about keeping your personal finances organized. For starters you need to take a serious look at where you money goes. You need to know exactly how much do you spend in a given day, week or month. It’s important also to know exactly what your money is being spent on.

Today let’s view your personal finances from the perspective of what goes out.

If you’ve never taken the time to honestly examine your spending patterns then you may find this somewhat overwhelming. But, it doesn’t have to be. I’ll walk you through the process of organizing your personal finances one step at a time.

In order to get your personal finances in good money management order you need to be honest with yourself. In other words, you won’t improve your situation unless you come clean about where all your money is really going.

Grab a pencil, some paper and let’s get started. First, write down your basic living categories. These include your rent or mortgage’ and your bills’ (gas, electricity, telephone, cable etc.). Next, write down insurance’ (house and car) and car expenses’ (gas and repairs) or transportation’ if you don’t have a car but have daily travel related expenses like bus, subway or taxi fares. If applicable, note anything in brackets as a sub-category.

Your next categories should be food’, clothing and accessories’ and personal hygiene and toiletries’ (cosmetics).

Follow the above with a credit card’ category. Your sub-categories would be the names of the individual cards you owe money on. (Also don’t forget about any store card repayments, rental agreements, or any outstanding loans you have.)

Now, list entertainment and leisure’ (cable or satellite bills could be a sub-category here if you didn’t list it above). Memberships would also fall under the main entertainment and leisure’ category.

Finally, that brings us to vacations’ and gifts’.

The above categories are just an outline. Please create categories for any other personal finance expenses you have.

Once you have your list start filling your categories and sub-categories in. To determine what you spend on a monthly basis you may need to consult bank statements, bills or receipts. If you can’t come up with an exact monthly amount just write down your best estimate.

Don’t give this process the power to overwhelm you. Take things slow – one category at a time.

Organizing your personal finances doesn’t happen overnight but with a consistent effort made over time you will achieve money management success.

The goal here isn’t to be 100% accurate but to give yourself a good representation of where the bulk of your money is going. Armed with this information you can the take the next step.

I’ll post the next step soon. In the meantime, you may want to read some of my previous personal finance posts to gain a better sense about how having a positive outlook can make a real difference in how successful you are with your money.