Personal finance can be super frustrating and annoying. Who really enjoys sitting down and reviewing their finances? We know when it comes to money and figuring out what to do, it can be overwhelming, daunting and rage-inducing. One of the most frustrating things is never having enough at the end of the month. Hopefully, you’ve been following us from the beginning and starting to find effective ways to manage your money. With this post, we are continuing our theme; keep your personal finances simple! In previous posts we talked about the why of organizing your finances. Now, we are going in-depth about how to organize your personal finances.
Here are some helpful tips to make your personal finances simple:
After signing up for online banking, set up two bank accounts, one that is an everyday chequing account and one for bill payments. Hold tight for an explanation.
Match up your bill payment timing to match up with how your pay comes in. If you get paid bi-weekly, change any bills to bi-weekly payments. For example, we have our mortgage payments to be withdrawn on payday.
You might be wondering what to do about the bills that you can’t change to bi-weekly like your cell phone bills, insurance, etc. This is where your second bank account comes into play.
If you recall, in last week’s post we set up expenses for monthly and bi-weekly payment dates. See below:
Now, figure out how much you owe for each bill. For example, your Rogers bill is $150/month, insurance is $300/ month and other utilities are $150/month. In total, yours bills come in around $600/month.
Set up an automatic transfer for $300 (half of your bill total), bi-weekly, from your main chequing account to your second bank account and have your bills paid from here. Be conservative just in case one of those bills like the phone bill is slightly higher. With automating your finances, you can kick back and ride that sweet finance train all the way to happy town. Since its 2016, most companies have automatic bill payments and make it simple enough that even your computer illiterate grandmother can figure it out.
Lather, rinse and repeat for your debt repayments or savings. Remember – pay off your most expensive debt first! Calculate how much you need to set aside and automate the shit out of that payment.
Once you’re done setting up your bill payments, the money left over in your “everyday” chequing account is for your extra funds. You can budget your variable expenses; food, transit, entertainment, etc. Knowing how much you have left over will help you make better life choices (saying no to your fifth drink that you can’t afford and yes to food!)
That’s it… if you can nail these 6 steps down you will definitely be one big step closer to conquering your personal finances and starting to build your future wealth.
For you visual learners, a helpful chart!