Is your money organised?

I recently helped a client clear out her financial junk drawers. The contents were:

·       Four cheque books

·       Three rarely used Individual Savings Account (ISA) paying in books

·       Two out of date credit cards

·       A stash of crumpled bank statements – one for each month since 2017

·       A bundle of unopened pension statements – one for each quarter of the last seven years

·       A dusty shoebox filled with faded receipts for unidentifiable purchases

·       10 years’ worth of utility and council tax bills

·       Stacks of expired train tickets that had accumulated over the last three years, and

·       A half-eaten packet of Fruit Pastilles that looked a little stale.

Everything had been stashed away to be dealt with ‘at some point’, but ‘some point’ never came.  Eventually, her loose plan to get things in order fell away. The papers became what I call ‘just in case’ clutter – one of the harder to deal with types of clutter.

Aside from the drawers looking chaotic, the consequence of all this was that my client  – let’s call her Linda – had no idea where her essential financial paperwork was hiding.  Linda couldn’t budget because of the mess and had lost track of how to access some of her accounts.  Linda had no idea what she’d allocated to her ISA or to her pension, and was worried her retirement plans were veering off-track.

Linda couldn’t pinpoint exactly when she had started to lose control, or why.  But she knew that almost every time a money-related letter arrived in the post, it was confined to what she called her ‘metaphorical and physical financial junk drawers’.  Linda confided that she’d known for years that she needed to get on top of her money but, as the years passed and the paperwork piled up, fear set in and getting organised had become easier to avoid than it was to face.

Sound familiar?

Perhaps this scenario sounds familiar to you.  If we’re all being honest, most of us will at some point have lost control of at least one aspect of our finances, or kept documents and items like old cheque books because we simply have no idea what to do with them.  I certainly have.

But the pay off for getting your money and financial paperwork in order can be huge.

Aside from creating physical space, clearing out your finances and getting them organised means that you are mentally positioned to pursue financial goals.  You’ll also be better able to budget, could find it identify and change bad spending habits and it could help you to spot to ways that your money could be working harder.

Seven steps to a more organised financial life

1.Start by clarifying what you want to achieve.  Everyone should be able to quickly locate their important financial documents, however, you might also want to have a more organised and consistent approach to saving, or to better understand the progress that you’re making towards funding your retirement.  Define your goals at the outset and keep them in mind at every stage of your declutter.  Staying focused on your goals should help fend off the urge to procrastinate.

2.Gather everything in one place. Don’t worry about organisation or shredding documents at this stage.  By bundling together all of the papers, cards, booklets etc that you need to work through, you’ll immediately gain perspective on the volume of paperwork that you have and need to tackle. Try not to be put off by what you see  – the piles will get smaller from here!

3.Decide what to keep. You will need to retain identity and access documents/cards, so separate these from papers that you think you could shred, such as old bills that have been paid, statements that you have read and guarantees that have lapsed.  Before you discard anything, check the relevant rules about document retention for taxes and other financial affairs and ensure that your disposal method protects your personal information.    

4.Decide where to store documents that you need to retain. I typically use three clear folders and keep them in a drawer.  One folder is for important identify documents such as my passport, birth certificate and a copy of my will, one is used to house my bank cards, a card reader and one cheque book, and the third is my ‘pending items’ folder, which includes paperwork that I need to review and respond to and ad hoc invoices that need to be paid, retained short-term and then disposed of.

5.Pause and reflect.  It is common for people to lose track of bank and other accounts over the years, so spend a few minutes considering whether anything could be missing.  Services such as My Lost Account could help if you think you need to trace lost or dormant bank accounts. Contact your pension provider if you’re struggling to locate key policy and account information.

6.Put strategies in place.  Think about the goals that you identified in step one.  Now that your finances are more organised, what systems can you use to help you stay in control of your money?  E.g. if you want to save for a house deposit, would establishing a regular automated payment into a separate savings account help? I like to keep my bills and my savings separate because this helps me stay on track with my budget. I make sure that all of my regular bills are paid by direct debit, out of my ‘bills’ account.  If I am an expecting ad hoc invoice, then I set a reminder for it in my digital diary ahead of the due date.  I use open-banking app Snoop to provide me with an overview of my accounts in one place and the app makes it easier and less time-consuming for me to identify patterns in my finances and ways that I can save.

7.Have regular ‘money dates’. Engaging with your money on a regular basis can help to ensure that your finances stay organised.  They can also help as you work towards your goals. Set aside time to check the balance on your current account, to review your savings, pension, bills and budget.  The frequency of your ‘money dates’ will vary depending on your needs and the accounts that you have.  I typically diary mark my dates in my phone. I check my current accounts weekly, review my bank statements monthly, and check my investments quarterly. An accountant friend of mine has daily money dates – he sets aside 10-15 minutes every night to focus on his finances and finds that this helps him stay on track, particularly with his day-to-day spending.

If you’re lacking in financial confidence, getting organised and checking in on your money at regular intervals could also help you build belief in your abilities. It will help motivate you if things are moving in the right direction and, if they’re not, having a regular money date could help you to re-align your spending patterns and financial habits with your goals.Its a much better strategy than leaving things to chance.