Personal Productivity & Finance
Regina Leeds is the author of One Year to an Organized Financial Life, as well as New York Times bestseller One Year to an Organized Life. She believes in step-by-step processes to get organized, whether you’re talking about organizing your home, your work or your personal finances.
There was a time when I believed you had to have a trained business mind to enjoy a successful financial life. In my youth I made stupid mistakes that caused seismic financial consequences. Now I know better. If you have common sense and just a touch of self-control, you can master the basics. While it’s true that Ben Bernake will never call for my advice, I’ve got my personal debt under control, I’m saving for a home and I know the big culprit that got me into trouble in the past. (Hint: it’s small, obvious and cumulative.)
There’s a common denominator unifying all the various aspects of my life from my finances to my physical space: organization. Ask me how much I owe on my credit cards (I have a personal use card and one for business expenses), I can tell you in seconds. Ask me to produce an important document like my social security card or will and I’ll have it for you in a flash. Would you like to see any of my tax returns? Not a problem! It isn’t rocket science nor does it take a huge amount of time to get and/or stay organized. It does however take a little old-fashioned elbow grease to create a system and then a commitment to keep it going.
What’s that you say? You don’t have time to devote to this project? Or were you the one who said you get organized all the time and it never lasts more than a week or two? Or maybe that was you I heard say that no one in your home honors what you organize. Let’s take a minute to deal with each.
- If you aren’t organized, you’re going to lose time searching for important items in your life. You have a choice: spend frantic time searching for lost items or dedicate a few hours to give yourself the gift of control and peace of mind. One way or another the time will be expended. ‘How’ is up to you.
- If your efforts at organization never last more than 2 weeks, guess what? You aren’t getting organized you’re tidying up. The former introduces systems and designated locations for items. The latter means shoving things into drawers, cupboards and behind doors so that the appearance of organization is in place. Without rhyme or reason such efforts are doomed.
- You know what Hamlet said: ‘Something is rotten in Denmark.” If the people with whom you live don’t honor the organization projects you complete, there is a lack of respect at play that is a separate issue from the lack of organization. You know what Dr. Phil says: we teach people how to treat us.
A few personal questions…
- Do you know how many credit cards you have and your total debt? Do you ever get hit with late fees because you’ve forgotten to pay a bill?
- How much do you spend each week on miscellaneous items? Are you sure the total you just quoted is accurate?
- Do you have a budget? If your response was ‘yes,’ how often do you update it? If your response was ‘no,’ how do you manage your money without one?
- If I walked into your home in the next five minutes and asked you to produce some important documents, would you be able to or would a drama ensue?
The Bottom Line
Let’s look each question and consider the appropriate response.
- The first question relates to how you handle your credit. Credit and debt have a huge impact on your FICO score. I have a friend who says that the FICO score is an invention of the big banks and he refuses to be controlled by them. His score is in the toilet. He may feel like a rebel but when he wants to purchase a big-ticket item like a house, a car or a big screen TV, his low score will have an impact on the interest rate he pays. When he needs to find a new job, his perspective employer may very well check his FICO as an indication of how responsible my friend is. His rebellion is going to cost him. Will yours?
Pay your bills on time to avoid late fees and other exorbitant (and unnecessary fines). Watch the credit to debt ratio on all of your cards. And always pay more than the minimum even if that’s only $10. Need help remembering to pay your bills? Try this trick: pay them on line on the first of every month. You can select the due date on your account as the day the funds are to be taken from your bank account. The five or so minutes it takes to log on and pay bills is minor. The time, energy and potential money you save will be priceless.
- Small, miscellaneous expenses will drain you dry. (In my ‘unconscious youth’ this was the nemesis I alluded to in the opening). You don’t need to live an austere life without any treats but a daily coffee addiction at a high cost venue can cost you a small fortune at the end of the month. Do you frequently rescue yourself with an emergency trip to an ATM? How often do you forget to log that withdrawal in your checkbook? When you’re waiting on line at the grocery story, do you find yourself tossing several magazines into the cart? These are the kinds of expenses that add up. Try this experiment: for one week purchase everything with cash or by debit card. At the end of the week add up how much you spent on miscellaneous, discretionary items. Now multiply that by 52 weeks and ask yourself if it wouldn’t be wiser to use some of this money to create an emergency savings account with 3 to 6 months living expenses on hand?
- Budget is for many as dirty a word as any four-letter epithet. Ironically instead of an instrument of torture meant to rob your life of all spontaneity and fun, a budget is actually an instrument designed to make you more powerful by allowing you to consciously direct how your funds are being used. Your budget shouldn’t be etched in stone. As your goals and income change over time, make the necessary changes in your budget. Review it every six months. Plan for the things in life that bring you joy. If that’s a daily cappuccino just be sure you can afford it!
- At the heart of being fiscally organized is a working file system. Not a file cabinet filled with the past but a logically created series of file folders that keep important up to date financial papers at your fingertips. It takes some time and dedication to set up a system. Maintenance should be more a matter of commitment to the goal of staying organized than some huge expenditure of time. For example, it doesn’t take any more effort to drop an important piece of paper on a pile and hope you remember where it is when you need it than it does to drop that same paper in a file folder dedicated to housing related material. Staying organized is a different use of the same amount of energy it takes to maintain chaos.
One stop shopping…
In my new book One Year to an Organized Financial Life
(written with financial planner Russell Wild), you’ll find detailed instructions for setting up a file system, building a healthy FICO score, creating a realistic budget, finding hidden money in your home and more. It’s the book I wish I had had to read years ago when I assumed that understanding basic personal finance took a Harvard MBA. There’s an old Zen proverb I love to quote: ‘The way a man does one thing is how he does everything.’ If your finances are in disarray the odds are good that so are other aspects of your life. Make a commitment in the financial area and watch everything else start to shift as well. As I said at the start, this isn’t rocket science. If I can do it, trust me, so can you.
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