Just like having your home in order can make life easier and less stressful, having your financial house in order can save you time and worry. It can also help you spend less, save more, and work more effectively towards your financial goals.
Your “financial house” refers to all the aspects that go into your financial wellness, including the information found on your financial statements, any debt you have, your budget, and your retirement planning and accounts.
Getting your financial house in order typically involves taking stock of what you have, getting rid of things (or accounts) you don’t need, creating a budget, and setting up a few systems to make it easy to achieve your financial goals.
Below is a simple step-by-step for doing a financial clean-up.
1. Taking Stock
You can’t organize what you have if you don’t fully know what you have, so a good first step is to track down all of your financial statements and accounts, or access them online. If the password or log-in is long forgotten, you can reset your accounts or call customer service lines to get access.
You can then make a master list organized by category. This might include:
• Assets This includes traditional and online bank accounts, retirement savings, and other investments.
• Liabilities These are loans, such as mortgages, credit card debt, student loans, or other forms of personal debt.
• Income This would include all sources of income, such as salary, investments, and alimony.
• Fixed expenses These are bills you pay every month, such as rent, mortgage, and utilities.
This step can help you discover unpaid bills, as well as savings accounts or retirement accounts you may have forgotten about.
2. Clear the Clutter by Going Paperless
Electing to go paperless on bills and bank statements is not only good for the planet, but can also help you keep your finances in order by creating less physical mess. Getting bills in the mail and seeing them pile up can also evoke a sense of dread. In addition, some banks offer benefits to customers who sign up for paperless billing.
When you go paperless, you can designate a day for tackling monthly expenses. Then, on that day only, you can open those emails and pay them. If you prefer a paper trail, you can print out your receipts and file them away.
3. Consolidating Accounts
Having abandoned 401(k) accounts or multiple saving accounts across different banks can be confusing and hard to keep track of. If this is the case, it might be time to consolidate and simplify.
You can move old savings into more frequently used accounts by transferring money from one account or bank to another. You may also be able to roll over your 401(k) from a former employer into a new employer’s retirement plan.
While this step isn’t necessary, tidying up accounts can save you the hassle of dealing with statements and notifications from several different financial institutions.
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4. Tackling Debt
Once you’ve taken stock of your overall financial picture, you will likely have a better sense of how much money you owe. This can feel overwhelming, but also empowering. Once you know the numbers, you can deal with them head on, and come up with a debt reduction plan.
You may want to first determine “good” debt, such as student loans and mortgages vs. “bad” debt, like high-interest credit card debt and personal loans. When paying off debt, it can be a good idea to prioritize bad debt first.
There are a number of different ways to make paying off debt feel manageable, such as the snowball method or avalanche method. The key is to find an approach you feel you can stick with and to simply get started.
As you knock off debts, you’ll have fewer minimum payments to juggle. What’s more, you’ll be able to funnel the money you once spent on interest towards your financial goals.
5. Creating a Budget
After you’ve taken stock of all of your accounts and bills, you may want to go one step further and set up a monthly budget.
To do this, it can be helpful to pull out the last three months or so of your bank statements. You can then use them to figure out how much is coming in each month (your average monthly income after taxes are taken out) and how much is going out each month (your average monthly spending).
If the numbers are tight (meaning there’s little or nothing left over to put into savings), or you see you are actually going backwards, you may next want to create a plan to cut your spending.
This might include getting rid of certain monthly bills, such as streaming services you no longer really care about or quitting the gym and working out at home.
You may also want to set monthly spending targets, such as how much you will spend on nonessential categories, such as clothing, eating out, and entertainment, each month.
6. Setting Goals
Setting some financial goals can help motivate you to stick to your budget and put money into savings each month.
If you’re saving up for something fun (like, say, a vacation), you might be more inclined to cook at home instead of ordering in. Money goals can function like a compass that guides the direction of spending.
Not sure of a goal? Here are some common financial goals you may want to consider working toward:
• Creating an emergency fund.
• Paying down debt.
• Increasing retirement savings.
• Saving for a downpayment on a home.
• Putting money towards something fun, like a vacation or new wardrobe.
Goals won’t always look the same person to person, but having one (or two) can help guide your financial plan, making it easier to spend and save with confidence.
7. Automating
Saving, spending, and paying bills doesn’t have to mean reinventing the wheel every month. You can significantly reduce the amount of work involved in money management simply by relying more on automation.
One of the benefits of automating your finances is always paying your bills on time. This can save you money by avoiding late fees. Having a history of on-time payments can also help improve your credit.
In addition to setting up autopay for your regular bills, you may also want to automate savings. This means having a portion of your paycheck (and it’s fine to start small) automatically transferred from your checking account into your savings or retirement account after you get paid.
This ensures that saving will happen each and every month, since the money will be taken out before you have a chance to see it — or spend it.
Automation won’t take all the work out of keeping your financial house in order, but it can eliminate many of the chores — and many of the choices — you have to deal with each month.
The Takeaway
Getting your financial house in order isn’t as complicated or time-consuming as many people assume. And, you don’t have to do it all at once. You may want to set aside an hour or so one day a week to focus on financial house-cleaning, and just take it one step at a time.
Tidying up your financial home can take work, but you don’t have to go at it alone. A SoFi Checking and Savings Account can make the complicated a little easier. With SoFi, you can earn a competitive annual percentage yield (APY) and save and spend, all in one account. And SoFi Checking and Savings doesn’t have any account fees which could eat away at your savings.
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SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
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