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How To Organize Your Finances & Keep Them Organized

February 26, 2019 · 6 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

How To Organize Your Finances & Keep Them Organized

You’ve got stacks of bills on your desk. There are old, never-opened bank statements shoved into a drawer and money sitting in accounts at five different banks; no—six different banks.

It’s getting to the point where it is annoying and stressful. Maybe it even keeps you up at night, or you beat yourself up for having not taken action.

But mostly, you know that it doesn’t have to be this way. The time has come to organize your finances.

The hardest part of organizing your finances is knowing where to start. Luckily, there are some very simple steps you can take and starting is as much a matter of motivation as anything else.

You just have to sit down and do it.

It also helps to have some guidance to nudge you in the right direction. So if you’re feeling lost about how to organize finances, we’re outlining six steps that will help you to put your money in order.

What’s great about organizing your finances is that the work is front-end heavy. It might take you a few weeks to get the hang of it, but once you do, maintenance and upkeep are relatively simple.

How to Organize Finances

Here are some ideas on how to organize your finances at home, written out step by step.

Step One: Gather Statements

A great first step is to gather up statements and logging into all accounts. (Arguably, the hardest part.) More specifically, you need to know information about your assets, liabilities, income, and expenses.

Assets: Bank accounts, retirement accounts, home equity, other real estate or investments

Liabilities: Credit cards, student loans, mortgage(s), other sources of debt

Income: Salary, gifts, alimony, investment income, business income, etc.

Expenses: Credit card and debit card statements, ATM or cash withdrawals, other sources of spending

Organize this information using files, spreadsheets, or whatever else works for you. Of the four categories, “expenses” is the most difficult category for which to gain a clear picture. For now, simply identify the ways in which money is leaving your pocket.

Later, we will create a budget, but your job right now is to determine where the money is leaving from each month.

Step Two: Determine Your Goals

Once you’ve got all your documents in place, it’s time to think about your financial goals. Think about what you’d like to accomplish in the next year, five years, and ten years. It helps to write these down.

Some ideas?

Saving up an emergency fund and paying down all high-interest debt like credit cards are two great places to start. Beyond this, work on putting a percentage of your salary away for retirement or saving for a down payment.

While you’re at it, write down your “fun” money goals such as travel and a wedding. Once you’ve done this, put a price on each of these goals, and a date you’d like to achieve them by.

When you go through this exercise, you may notice that you can’t work on all of your goals quite yet. That’s okay; simply put them in order of highest priority to lowest, and start from the top of that list.

Step Three: Consolidate Where You Can

Having lots of different credit cards and bank accounts can get too confusing to manage properly.

Credit cards:

If you are able to successfully manage having credit cards (paying off the balance in full each month), then you may want to whittle down to having just one or two cards. If you have multiple cards with balances, work on paying them off, one by one (while continuing to make minimum payments on all cards).

You can do this in the traditional way, by paying off the cards with the highest interest rate first (called the “avalanche” method), or by chipping away at the card with the smallest balance first (the “snowball” method). Just choose one, and pick off those credit card balances.

Those with high-interest credit card debt could also consider paying off cards with a personal loan at a lower interest rate. A lower interest rate could help borrowers to pay their debt back faster, but it should be noted that this strategy doesn’t cut to the root of the problem of why the debt exists in the first place.

Bank accounts:

First, determine what accounts you need. For most people, it will be some combination of a checking account, savings account for mid-term savings goals, one or two retirement accounts, and perhaps a Health Savings Account and accounts designed specifically for kid’s college. Of course, some folks may find that having more accounts helps them manage their money better. Figure out what works for you.

If you have multiple, old, obsolete accounts floating around, it’s time to start consolidating. Merge accounts where it makes sense, and close accounts that you don’t use. Get all of your money exactly where it needs to be. This is arguably the most difficult step in the process, but it’s important.

These days, there are more different kinds of accounts than ever before. This is great because people have so many options, but it’s difficult because, well, there are so many options. If you’re looking for a simple account that has the ease of use of a checking account and the interest rate of a high-yield savings account, take a look at SoFi Money®. This could be an all-in-one cash management account that you’re looking for.

Step Four: Track Your Spending

Now that your goals have been decided and accounts are in place, it’s time to build out a framework for budgeting. And before you can build a budget, you have to take some time to track your spending.

Tracking spending is going to look a little bit different for everyone. You may need to try a few different methods before you find what works best for you. Some ideas: Track your spending old-school style in a notebook, with pen and paper, tracking spending in Excel using downloads from your banks, or using an app like SoFi Relay.

After tracking your spending for two months (it is also possible to track backwards, if you want to get moving fast on your financial organization), take a look at your spending patterns. Some spending might be straightforward, like rent or mortgage loan payments. Other spending categories might surprise you. The idea here is to have a realistic idea of your monthly cash flow so that you can build a budget plan.

While you are tracking your monthly inflows and outflows, take note of whether you have extra money left over at the end of the month, are breaking even, or are dipping into savings or using credit to cover the difference. If you spent more than you earned, does this happen often? Understand your patterns.

Step Five: Build A Budget

There’s a reason that you track your monthly cash inflows and outflows before you build a budget. Without some idea of what you’re actually spending in each major budgetary category, you have no real basis for which you can build one. With a starter budget, the first goal is to be realistic and to learn your spending patterns. The second goal is to use it as a framework to spend less and save more.

Your next step is to build out budget categories. Again, these will be different for everyone, but some common categories include: Rent/mortgage payment, insurance, utilities, groceries, entertainment, dining out, medical costs, transportation, housing supplies, toiletries, clothes, debt payments, and incidentals.

As your monthly budget and budgeting technique becomes more streamlined, you’ll be able to determine the areas you want to pare back on. Ultimately, the goal is to build savings right into the budget plan.

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Step Six: Automate Where You Can

One of the single-greatest things you can do to make your financial life easier is to automate wherever it makes sense. Every time you automate, you remove some amount of labor and emotional stress from your life.

The first way to do this is through automatic bill-pay services. You can set most of your utilities to automatically deduct money from your account or charge a credit card. For bills that aren’t compatible with auto-pay, set yourself a reminder to pay on your calendar so that you won’t forget.

Next, automate your savings. Doing so with a 401k through your work is a great option, if you have access to one. If you want to save money outside of a workplace retirement plan (or don’t have one), it is also possible to set up an automatic contribution to a savings account of your choice. You can do this once or twice a month, based on how much you want to save and your pay schedule.

When it comes to organizing finances, the hardest part is just getting started. Don’t feel like you have to do all of these steps in one night, but do give yourself a timeline to complete them. You’ll be so happy you did. Once your financial infrastructure is set up and in you’re in a groove, maintenance is easy as pie.

Ready to get your money organized? Check out SoFi Money, a cash management account that has no account fees.


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