It does not take a lot of time!!
Most people will say they cannot get their finances organized because they do not have the time. Do yourself a favor – commit to an hour or two a week and get everything set up to be automatic and watch your financial life improve.
For example, I have 18 savings accounts. How do I manage them? Using an online bank I automatically transfer an amount per paycheck out of my checking account into one of the savings accounts. This account then automatically distributes money to the remaining 17 savings accounts.
By having a savings account for each of my financial goals I can easily see how close to reaching a goal I am or being able to meet a payment that does not occur monthly. For example, you should know what your spending limit is for Christmas. Divide that amount by the number of paychecks per year and that should tell you what needs to be transferred into that account each paycheck. Do the same with what you want available to spend on an annual vacation. Same with your property taxes if they are not escrowed. Same with life or auto insurance if not paid monthly. Even if paid monthly, you should try to get to the point of paying it less often so that you pay less since most insurance companies charge you a higher rate if you pay anything but annually.
Additionally do this with savings goals. If you know you want to purchase a new car in five years, what do you need to save per paycheck to be able to totally pay cash or need only a minimal loan? What about that new roof, new furniture, new appliances or any other home improvements? Maybe you want to go back to school or will soon need to send your child off to college. Maybe you need a downpayment for that new house. Maybe you want to move to a new location and need to accumulate the money to do so.
The first thing I usually hear from someone when I suggest this method is, I do not have enough cash to save anything. I am using all my paycheck to just survive. Two statements in regards to this:
1 – This is money you are going to be spending anyways. The key is to plan in advance so that you are not taking out additional loans and paying interest, thus resulting in paying more for a item. If you cannot save the amount you want for Christmas or a vacation or whatever, then maybe you need to re-evaluate how much you can spend on that goal. You are either going to save for it in advance or you are going to end up going into debt.
2 – How often have you gotten a raise and thought about all you could do with that new money? Six months down the road you cannot figure out where that money is going. The same is true if you make less available. If you only leave 90% or 80% of your income to live on while saving the rest, you will probably adjust your lifestyle to spending less without really noticing it after a very short period of time. As humans, we are very adaptable.
You can do this with monthly debts too. If you are used to paying debt monthly and paying only the minimum, you will decrease the length of that debt if you switch to a biweekly or even weekly payment. Set it to automatic so that you do not have to think about it. By making those payments earlier in the month, you will significantly decrease the amount of interest to be paid.
Afraid of bouncing checks due to forgetting to record automatic transfers or bills being paid? Then have this part of your paycheck deposited into a local savings account and move the money in/out of there. This money will not appear in your checking account and you will not need to worry about money being taken out earlier than expected.
Spend that 1/2 hour or hour for the first few weeks getting everything set up automatic. Then it will just be monitoring after that and you can move onto educating yourself financially to improve your life.
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