Cleaning up your finances while you’re in college may seem like a tedious or intimidating chore. Do you really need to do that now? Can’t it wait until after you graduate? You could, but the problem with ignoring them now is dealing with a bigger mess later. Over a period of time, minor financial issues could snowball into major disasters. One way to avoid reaching that point is by setting up a system to clean up your finances regularly. Want to know how to organize finances?
Here are 4 steps that will help you get started:
Step 1 – Sort Out Your Paperwork
Are your financial papers—bills, receipts, bank statements, paycheck details—all over the place? You’re not alone. Most students just leave their bills and other papers lying all around the place. Or lose them entirely. Very soon, it can grow into an unmanageable mess. Having a system in place will ensure that all important financial papers are easy to find whenever you need to.
To start with, save only the essentials. This includes:
- Loan paperwork (both private and federal)
- Investment statements
- Tax returns
- Active vehicle insurance policies
- Receipts (and photographs) of big ticket items so you can claim insurance if it is damaged or stolen
- Receipts for larger purchases in case your credit card company flags it as suspicious
Some people prefer digital spreadsheets or folders. If you prefer something more physical, try creating a financial binder. You can use different tabs for different financial information. Whatever works to keep your things orderly and neat—so you can find a specific bit of info if you need it.
Step 2 – Create or Review Your Budget
If you haven’t created a budget yet, it’s time you did.
- Click here to check out our guide on how to create a budget!
If you’ve already created a budget, it’s time to review it.
Create a spreadsheet with your income and expenses. Ideally, your expenses should be less than your income so you have some money saved over every month. If you’re spending more than your income, see where you can cut back on your spending. You’d be amazed at how much you can save by simply eating out fewer times a week. You can also save by switching to generic brands.
The sooner you create a personal budget, the sooner you start cultivating smart financial habits. It can also be eye-opening to see your purchases line by line. What is consistent in your spending? What was unexpected? What can you change? When you see things laid out, you can better adjust your habits and make a plan. It’s a key element in learning how to organize finances.
Step 3 – Consider Automation
Do you keep forgetting to pay your credit card bill on time? Rent? Loan payments? Late payments can have an adverse impact on your credit score. This will make it more difficult for you to get approved for a mortgage or loan later on. Why not take a few minutes to set up automatic payments for all recurring expenses? With automatic payments set up, you don’t have to worry about paying late or damaging your credit.
Step 4 – Check Your Credit Report
You get one free credit report every year. If you haven’t checked your credit report in a while, it’s time you did. In fact, schedule a credit check once a year, every year. There are several reasons why you should check your credit report regularly.
For one thing, it allows you to make sure that there are no errors in your report. If there are, you can get it corrected before too much time has lapsed. Analyzing your report also helps you determine what you can do to improve your credit. It also helps to ensure that you haven’t been a victim of identity theft.
Take the time now to clean up your college budget and learn how to organize finances. You’ll be glad you did after you graduate.
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