Financial Spring Cleaning

Do you have a junk drawer that hasn't been cleaned out in the last ten years?  It seems like we all have one of those drawers which is stuffed with miscellaneous items. It's hard to know what's in there when we are rooting through trying to find something specific. If your finances are as messy as the junk drawer, it's time for some financial spring cleaning.
 
Being disorganized may cause bills to be past due, incurring late fees and additional interest charges, and those late payments will hurt your credit score. Financial chaos may cause you to overdraw your bank account, causing hefty overdraft charges. Being disorganized may result in problems at tax time when you need to have financial information from the previous year available to maximize your deductions. Poor financial choices will result if you do not have a complete financial picture when decision making time comes around.
 
We are stewards of the blessings God has given us. Someday we will be required to provide an account of how we fulfilled our role as stewards, and keeping your finances organized helps you be a good steward. As it says in 1 Corinthians 4:2: “Moreover it is required in stewards that they be found faithful.”
 
The first step in getting organized is to create a filing system by breaking your finances in to specific categories, including bills, various types of insurance, pay stubs, and receipts. Try to keep everything that is similar in one place in date order so you can easily find things. Set up manual or electronic files and give the files specific names that say exactly what the file contains. Keep your files wherever you normally write checks or pay online.
 
Most bills are due about the same time each month so create a monthly checklist and check off each monthly bill as it is paid. This will help you ensure bills are paid on time. Proverbs 3:27-28 reads: “Do not withhold any goods from the owner when it is in your power to act. Say not to your neighbor, ‘Go, come back tomorrow, and I will give it to you,’ when all the while you have it.” Paying bills on time is a large part of being a good steward of the finances God has entrusted to you.
 
Note the date and amount paid for your records. Keep the statement until the next bill comes in so you know your payment has been received and processed, then shred the paid bill for privacy and identity theft protection.
 
If there are discrepancies and you have to talk to anyone who has issued you a bill, keep notes — the name of the person, the date and time you talked to them and a brief synopsis of the conversation, along with any action items you or the other person has. This will ensure you have some history in case of ongoing disputes.
 
Another important step in getting organized is to have a regular check up on your net worth once a quarter or once a year.  Your net worth is calculated by completing a personal financial statement.
 
A net worth/personal financial statement basically has 3 pieces – assets, liabilities and the difference between the two. The asset list is anything you have that is of value: house; vehicles; bank accounts; investment accounts; retirement accounts; jewelry; furniture; electronics, etc.
 
The liability list is any debts you have: mortgage; car loans; student loans; credit card debt; consumer loans; home equity loans; and any past due bills. Monthly bills that come due and are paid on time are not considered debt, such as the electric or phone bills.  But if these monthly bills are past due, then they are considered debts.
 
Your personal net worth is the difference between what you have and what you owe. Subtract the total liabilities from the total value of your assets and the difference is your net worth. Your net worth can give you a direction for where to concentrate your efforts. If your net worth is a negative number, It's time to concentrate on saving and paying off debt. If your net worth is a positive number, how are you progressing on your strategic savings for college, or a home, or retirement, and if you do have a positive net worth are you also being generous?
 
Once a year is a good time to review all your bank and credit accounts.  You should not have any open accounts that are inactive as they just clutter your financial portfolio and could impact your credit negatively. Limit the number of bank accounts you have, according to your personal needs. Some people may need just one account whereas others may prefer to have separate accounts for short term and longer term savings.
These are some tips that will help you stay on top of your bills and accounts, and keep your financial situation from looking like that junk drawer. Missing bill payments because of disorganization is the easiest financial problem to fix.
 
And remember that the best way to get your finances in order is to involve the Lord and ask him to lead and guide you. “For your heart will always be where your riches are ...” Matthew 6:21 tells us that our only riches can be found in the Lord.

Learn more at Compass Cathoic.org