Personal finances can be the largest cause of stress in your life. Aside from issues regarding family and friends, your finances affect more areas of your life than you may realize. One of the best ways that you can take control of this stress and your finances is to become organized. Organizing your debts can help you manage, reduce, and even avoid future debts.
First Step to Financial Organization
The very first step to organizing your finances is to gather up statements for all of your bills and find a notebook and pen. Yes, there are many computer programs that you can use, but there is something more personal about writing out this task in long hand. Something psychological registers when you actually write down these figures, connecting you to the debt.
Make a chart with the following columns:
- Name of debt
- Type of debt: credit card, loan payment, medical bill
- Credit limit if applicable
- Balance
- Interest rate
- Monthly payment
Take the time to fill in your chart, and you will be amazed when you are finished. Looking at your debt in this manner will help you set your goals.
Simplify Bill Paying
Once you have created a chart you need to review the statements and find out if any of the bills offer automatic payments. Setting up automatic bill pay helps you avoid the stress of writing out bills and having them mailed on time. Even if you use online bill pay, having the payments come out automatically will reduce the amount of stress you feel.
Create a file for all bills that will require you to make manual payments. Having a specific place to store your bills will reduce your stress when it comes time to pay them. You will not have to search for statements or anything else necessary to pay the bills if they are kept in a specific file.
Using Your Organized Data to Master Your Finances
After you have completed your financial chart, you have a perfect picture of where you stand financially. Do you have very high credit card interest rates? Are you in more debt than you thought? Did you even realize until now how much of your income goes toward your bills?
To master your finances you must see where your money is going, apply extra money to high interest debts, and refrain from creating new debt until you have other debt paid off.
Credit card debt should never exceed 30% of your total credit line. By following this guideline you can greatly improve your credit score as well. Using your newly organized bills, you can create a budget that will pay off your high interest debts first, reduce your overall debt burden, and improve your credit score.
Managing your credit score will greatly reduce your financial stress because you will be able to receive financing at lower rates. When you finance at a lower rate, you reduce your debt burden for the purchase. This is the key to financing success.
Becoming organized with your finances also helps eliminate other types of stress in your life. When you know that your finances are handled, you can concentrate on other, more important, things in your life.