Jun 247 min read

Organizing Your Finances

Did you know that people who are more organized have more money? Imagine how much more money we would have if we organized our finances better too. In this episode of Talk Clutter to Me, we have Dr. Darla Bishop who is the owner of Finansis and author of How to Afford Everything and we're talking about organizing your finances.

What is the first thing you need to do to organize your finances?

Darla says that the very first thing is to verify what is coming in and going out. It's easy to just go and go and go and make an assumption of what's going in and out of our bank accounts. In order to break this habit and take control, you need to sit down with your app or bank statements and really look at where the money is actually going.

By taking a step back and really diving into this you might find out that you're still paying for a subscription or a membership or. That you're still using something that you could end or decrease. From a business perspective you may also not realize that someone who's supposed to be paying you quarterly hasn't actually been paying you. So whether you're an individual or a business owner, the very first step to organizing your finances is to sit down and look at all of your bank statements, credit card statements, and anything else you are using to exchange money with friends/family/clients.

Pro-Tip: Look at a 90 day period. Go in to this with the mindset that you're not going to pass judgement on yourself. This is about seeing where the money is going.

What is the best way to visually organize your finances?

Because I struggle with this myself, I wanted to get Darla's take on what the best way to visually organize your finances. I like to use a free program for the business called Wave, but I wanted to see what she recommended as well.

Darla's suggestion, if it works well in one area or your life, see if there is a way to incorporate it into your personal life. She also mentioned that a lot of financial institutions also have digital tools that can be helpful as well. Her bank will allow her to pull charts and reports so she can see things in a different way. She also mentioned that some banks will allow you to run reports and then you can upload those reports into Excel to produce different charts.

It's all about what works for you. There are several different apps available. Many people are enjoying the Rocket Money app, some people are find using what's already available in their banking apps. Try a couple of different apps out and see what works best for you.

Pro-Tip: If you're focusing on paying off debt, WRITE IT DOWN! There is an important brain and body connection about writing it down physically in a book, on a notepad, on a whiteboard. This allows you to take some of the power away from that debt.

Organizing Paying off Debt

Darla has two methods for paying off debt, the snowball and the avalanche. Whether you are choosing the snowball or the avalanche, you start the same way.

Create a chart (this can be done by hand or digitally on a spreadsheet or app)
Set up your columns
1. who you owe the money to
2. the amount of the debt
3. minimum/monthly payment
4. interest rate attached to that debt
5. deadline (some small loans have this)
Choose Snowball or Avalanche

Avalanche

If you're planning to do avalanche, you'd sort your list of debts by interest rate so that your debts with the highest interest rates end up at the top. Then you work those debts first. The benefit of doing the avalanche is over the course of paying off your debt, you end up paying the least amount of interest because you've paid off the things that have the highest percentage attached to it.

Snowball

If you are planning to do snowball, you sort it by the amount you owe, lowest to highest.

You start by paying off the lowest amount of debt and then work your way up.

Personally, Darla recommends the snowball method and the reason for that is because money isn't just math. If you're thinking about the math, avalanche makes the most sense because you're going to pay the least amount of interest in doing the avalanche because you're taking care of the biggest interest rate, the most expensive debt first. But depending on the size of that debt, It could take you months or even years to take care of that bigger interest bearing debt.

Whereas, if you choose the snowball method, with that same amount of money/time, you can knock out several smaller debts, building momentum. It gives you confidence that you can payoff debt and it's not such an unattainable task.

Pro-Tip: If you're feeling energized, you may even be able to find an extra few dollars to throw at the next debt on your list to pay it off even sooner!

How to Organize Paperwork for Taxes

I get this question a lot around tax time, how do you organize paperwork to make it simple during tax season. Personally, I keep a folder in my office labeled "taxes this year" and as we go throughout the year I just put whatever may be relevant to my taxes in that folder. When it comes time to go see the accountant, I take that folder with me and everything is there that they need. Once my taxes are done, I relabel the folder with the year and taxes and file it away.

Darla mentioned that sometimes a folder in your barely used office might not be the most convenient so she recommends clearing out a junk drawer in your kitchen and making it a paper drawer. Every time you may have a receipt that may be applicable to your taxes you can just throw it into the drawer.

Darla also mentions that she has a terrible time holding on to receipts so she has started just taking photos of receipts when she gets them. With the indexing Google photos and Apple photos do, you can actually search receipts and it'll pull up all of the images that have receipt on it. This is a great backup to have since she throws receipts away pretty frequently.

Tax Professional or DIY?

I also wanted to know what Darla recommended when it comes to tax preparation? Sometimes it's really hard to get into a tax professional and while having your paperwork organized definitely helps get you in and out of there quickly, is going to a tax professional really necessary?

Darla mentioned that it depends. The tax software now is really good so if you have something super simple you could probably do it on your own. If you're a business owner, home owner, property owner, have a more complex situation its definitely worth it go to a tax professional. They can save you time and money.

Literally Organizing your Finances

Our money is so spread out in so many different ways nowadays. We have banks, credit cards, 401Ks, investments, etc. I wanted to know what Darla recommended for keeping all of these different monies organized.

Darla said she faced this same issue as well. Being a military family, she had multiple 401Ks from moving jobs a lot and her husband had both a military retirement and a civilian retirement and keeping track of everything was a little much. To keep it all organized, she actually found a Will & Trust spreadsheet. It walked her through finding all of the accounts and having them in front of her. Once the spreadsheet was filled out, she was able to see what was where and make changes easily if need-be. You can find a similar spreadsheet by google searching will asset tracker or trust asset tracker. It is a lot of work on the front end but definitely worth it!

Don't Forget the Calendar!

Darla's last tip on organizing your finances was to not forget the calendar. It's not that monthly bill that trips you up, it's that month where you have 3 birthday parties and a wedding, or you're hosting a bbq and you need to allocate additional funds to those things. It's those. Irregular or periodic or once in a while expenses that throw people's budgets off.

I love this idea because I do it myself! I actually have a freebie on the website that can help you plan your year in advance so you know what is coming up when and you can prepare for it! After you download that, go to Darla's website and download her Paycheck Playbook!

Money Meetings

Darla also mentioned that she likes to do quarterly money meetings with her family and I just had to know what happens during their meetings.

Darla keeps a pretty standard agenda during these meetings, making sure that there is enough money in the shared bank account, discussing their upcoming calendars, what's happening with the kids, are they changing sports, new fees, new sports equipment, upcoming trips, confirming the amount for shared bills, etc. They like to make it date night and go to one of their favorite places in town so it's a relaxed experience. They also like to take notes during the meeting and email it to each other.

Pro-Tip: Talk about upcoming events and experiences first and then how to make it work within our means and within our budget. Remember, the more you do it the better you'll get at it!

What's Cluttering Your Life?

As always, I like to ask my guests (and myself) what is currently cluttering their lives. I think it's super important for all of us to realize that we all have clutter! Even the most organized among us has clutter!

Darla has a couple of things cluttering her life. First is her husband's new work schedule. She's having to do a lot of rescheduling to adjust to his new position. Also, he son recently celebrated his 4th birthday and is obsessed with firetrucks so they currently have an excessive amount of first trucks around the house.

And there you have it!

A treasure trove of tips from Dr. Darla Bishop on organizing your finances, from tracking your income and expenses to managing debt and preparing for taxes. Remember, the first step is to get a clear picture of where your money is coming from and where it’s going. From there, you can explore different tools and methods to visually organize your finances and find a system that works best for you.