Week 1 of the Money Makeover Challenge
Over the past year, did you pay any fees because of bills that were paid late?
Did you pay interest on your credit card just because you forgot to transfer the money?
Or did you misplace paperwork that cost you time and dollars?
Today I’m going to give you an insight in to my rubbish ‘money management system’ and how it is being upgraded this week! The foundation for getting on top of your money is to have a simple and quick system for managing your bills and your spending. Laziness, or poor organisation will most certainly cost you money. It certainly did for me last year.
In the past I was so damn diligent when it came to paperwork, paying bills and reviewing spending. I had spiffy spreadsheets, dedicated time each week and an up to date filing system. Then along came my little munchkins, and a gazillion different competing priorities (like sleep!) and it has fallen by the wayside.
At the moment, in our home, there are three in-trays that live in various places. One is the buffet in the lounge room, one on my desk in my office and the other is an ‘unofficial’ inbox (i.e. a random pile of unattended correspondence!) on our dining table! Where paperwork ends up really depends on who collects the mail and where they put it!
The random pile of paperwork that seems to gravitate towards my dining table! Do you have one of these?
As a result, last year there were some bills that didn’t get paid on time, and some documents that I misplaced. Not to mention the fact that my completely useless paper system takes up more time and mental load for me than it needs to. Looking at my credit card bills, there were two times when our monthly payment was late, causing interest to kick in (costing us $105 in total). There were also two late fees on other bills totalling $55. Not super huge figures, but completely avoidable costs if we were just a little more diligent.
And in terms of recording our spending…. Well that didn’t happen at all last year! As I discussed a few weeks ago in my New Year post, this is on the agenda for 2018.
So I’ve come up with a very simple system to hopefully avoid these late fees and make the process of managing our money a little smoother. Here are some tips that you might be able to adopt yourself to come up with your own system.
Tips if you prefer a paper-based system:
Have ONE place for incoming mail.
This simple idea was one of the main flaws of our paper management system. Whomever collected the mail would leave it in all random places around the house. The filing tray on my desk is now the ONLY nominated spot for mail and items requiring action. And most importantly, all members of the family and frequent ‘nan and pop’ visitors, have been introduced to the said filing tray on my desk!
My much loved green wooden in tray is now the ONLY spot for incoming paperwork and mail.
Create a filing system
This could be an expander file, a ring binder or a filing cabinet. Separate sections via dividers with different categories. I personally prefer a filing cabinet as it make filing super quick.
My fairly unsophisticated but functional filing cabinet system!
Start a habit of sorting the mail when it comes in (or when you spot it in the in-tray!)
Put advertising straight in the bin and put documents that don’t need actioning but that you need to keep straight in to the filing cabinet or folder. Put correspondence that needs to be actioned in your action or in tray (I just use the one in tray for action items and mail).
Dedicate 10 minutes a week at a set time for paying or scheduling bills and actioning paperwork.
This can also be a good time to enter transactions if you are tracking spending, or running your eyes over credit card and debit card transaction accounts to check for fraudulent transactions.
Choose a specific time each year to clear out your filing system.
For me, this is tax time. I gather together the papers I need for our taxes (remember – in Australia you need to keep copies of receipts etc for 5 years from the date your return is lodged). The rest – bank statements, rates bills etc, I either move to a ring binder and file away, or bulk scan, save and shred. Don’t forget you will need a good electronic back up system, a logical electronic filing system and decent internet security, if you are opting to shred.
And if you prefer an electronic filing system:
If you prefer to go electronic, you will need to create a virtual “inbox’ and a logical, easy to use data filing system (and of course undertake regular back ups).
I personally tried to get rid of the physical filing cabinet a few years ago, but the un-scanned ‘to be filed’ pile just grew and grew until it was overwhelming. I find it far simpler (for now) to just drop papers in to the right section of the filing cabinet as I go and bulk scan once a year.
SUMMING IT UP
I’ve created one inbox for all correspondence, and a set time each week to pay bills and review/record spending.
How long did it take?
About an hour and a half to get through the outstanding filing and set up the new system.
Not the most fun you will have on a Sunday night, but it could be worse!
You may have a mess of a system like me, or a fairly functional system that just needs a little tweaking. Have a think about what works and what doesn’t. Where are you falling behind? It may be as simple as setting a specific time each week to action bills or creating a single inbox for correspondence.
Keep it simple. And remember, small changes can make a big difference.
This one is hard to quantify, but assuming half the late fees and interest I paid last year could be avoided by being a little more organised, that is a saving of $80 a year (and a lot of time, stress and mental load!).
As for the cost saving of tracking our spending, I have a feeling it’s going to be huge. But time will tell.
Do you have a super effective system already, please share your tips below or via the Facebook page.
I would love to share your ideas with everyone.
Here’s to living your rich life!