Managing personal finances begins with tracking every penny that is earned and spent.  Only money that is tracked can be managed.  Many people want to handle their finances more effectively, but are intimidated.  Most people have multiple credit cards, at least one checking and one savings account, several different loans, and at least one source of income.  The number of accounts to monitor and pile of paperwork to track is overwhelming, even without considering receipts from purchases.  Here are four simple steps that everyone can do to effectively manage their personal finances. 

1. Choose a System

There are many different systems people use to track finances: the envelope system, spreadsheets, paid computer programs and free online web sites.  Each different system has its own strengths and weaknesses.

Often, the lack of a specific feature is used as an excuse to not implement a financial management system.  No program has every feature, but this should not keep people from using a method.  Any system is better than no system.  Without one, there is little hope of organization. With one, any one’s finances can be organized.

2. Simplify

Any financial management system is easier to use if the data to track is simplified.  Daily, floods of receipts, credit card offers and junk mail barrage systems.  Simplifying saves time and makes keeping track of personal assets easier.  There are several ways people can simplify their financial lives.

Use Automated Transactions

Tracking bills and purchases is one of the biggest burdens people need to monitor.  Bills pile up on desks, and every purchase has a receipt.  One of the easiest ways to simplify paperwork is by going digital.  Most bills can be placed on automated payments that are directly debited from an account.  Instead of depositing paychecks manually, people can be paid via direct deposit.  Electronic programs can monitor card purchases over the internet, so those receipts can be crafted into paper airplanes.

Stop Credit Card Offers

In addition to being annoying, pre-approved credit card offers pose serious identity theft risks.  These can be stopped by opting out of the pre-approval program.

Stem Junk Mail

Junk mail cannot be fully stopped, but the pile of papers can be greatly reduced by using the Direct Marketing Association’s preference system.  Through this, people can choose not to receive many advertisements.

3. Consolidate

The concept of consolidation is similar to that of simplification.  It is easier to track one account than five.  Consolidating makes managing accounts easier, which saves time and reduces mistakes.  There are several steps to consolidating accounts.

Close Unused Accounts*

Any account, whether it is a checking account, savings account or credit card, that is no longer used should be closed.  These accounts only provide more documents, which cause clutter.

*People should note that closing accounts can temporarily ding their credit score.  Over time, closing an account has no impact on a person’s credit score.  However, people who are taking out a loan or mortgage in the near future should wait until after the papers are signed to close any accounts.

Merge Accounts

When it is possible, accounts should be merged.  Following one account is easier than monitoring two.  If it is practical, having all accounts with a single financial institution further simplifies complicated systems.

Consolidate Paperwork

Even in this digital age, some paperwork is still required.  By keeping documents in a single location, important papers are less likely to be lost.

4. Regularly Process

Once a financial system has been chosen, and everything is simplified and consolidated, any one can become financially organized.  The key to maintaining order is regularly processing paychecks, bills and purchases.  If transactions are ignored, they quickly pile up.  Staying on top of them keeps the amount manageable.

Becoming financially organized is the first step to reaching financial goals. Finances can be intimidating, but through these four easy steps, people can become organized.  Choose a system, simplify, consolidate, and then use it.

About the Author: E. Steadman writes for TotallyMoney, an outstanding resource for those looking to smooth out their personal finances, or even find loans for bad credit.

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