Disorganised finances part 2 of 2: Practical tips to organise our personal finances

In part 1 of this series on disorganised finances we looked at the importance of paying attention to your personal finances and how mindfulness is the ideal tool to help you make this shift.

Once you are paying attention you become aware of the reality of the situation you are in you will probably find several issues that need addressing. These could include:

These are all complex and multi-faceted challenges that need separate strategies and time to address properly.

They are all issues that Financial Mindfulness looks at regularly both here and in the content within the app.

In part 2 of this series on disorganised finances we take a step back to try and address some fundamentals you’ll need to improve your situation.

We run through some of the golden rules for returning disorganised finances to an organised state and then look at the ‘fatal flaws’ for our hopes of staying organised in the future.

These guidelines have been provided as suggestions by some Financial Mindfulness’s highly experienced experts.

Time to face reality

You’ve presumably read this far because you know there’s a problem with your finances so you’ve already made progress.

Well done on that step and your willingness to face up to problems.

The first issue to face up to is debt: a pattern of being in debt often creates financial stress.

We need to get real around debt – as quickly as possible.

Not all debt is bad of course – if it is debt incurred to build a positive long-term goal or as a solid investment, it might be useful.

The problem occurs when we begin to accumulate multiple debts and ignore the red flags around those.

So we need to identify and detail all debts, seek help – urgently if need be – and build a plan to reduce those debts.

Maintaining a mindful approach to money will help us stay in reality about money – and this needs to be our new default: being in reality about money every day, every week.

At Financial Mindfulness we define being mindful about finances as being aware and paying attention to your finances, and that may mean seeking help.

Get your mindset and motivation right

To become organised, you need to see being organised as an important thing to do, says Hamish Ferguson, a director of Vision Property and Finance.

This means connecting on a daily basis to your purpose around money. You’ll need that motivation to sustain changes in your habits and behaviours

It’s also crucial know your underlying mindset.

One of the most persistent and pernicious reasons our financial goals fall away, we lose motivation, or we never seem to get ahead is our mindset.

“We always have more options than we often realise but if we have a negative mindset, or scarcity mindset, we’re not likely to recognise or see the opportunities that might be right in front of us,” says money behavioural coach Lea Clothier.

Our core beliefs about money can be very deep-seated. Uncovering them and developing a more positive outlook on money may take extra support, for example from a financial therapist.

Mr Ferguson, suggests says one way to help unlock our real mindset is to write a list of the benefits of not being disorganised and share it with someone you are prepared to be accountable to.

Keep revisiting this on your journey towards becoming better organised.

Set some positive financial goals

Mr Ferguson, part of the Financial Mindfulness team, suggests setting some achievable goals around your finances is important.

“These should be goals that would help you feel good about your circumstances,” he says.

Examples might be building savings of 2 months’ worth of expenses, or paying off a credit card and allocating the money towards savings or a buffer.

What happens if we’ve set a goal and we break promises to ourselves and a goal suddenly looks unachievable?

What is the first thing to do when we ‘fall off’ our goals and they suddenly appear unrealistic?

With goals related to money, it’s essential to do a little self-examination to stop any negative patterns taking hold that might lead to financial stress. These patterns might include compulsive spending as a coping strategy.

Firstly, it’s important try not to abandon a goal just because it didn’t work out perfectly, or even if it seemed to fail entirely.

The reason for having that goal may still be sound.

It sounds obvious, but don’t give up! Regret over failure is far harder to deal with than the failure itself.

Really, falling off a goal creates a valuable opportunity to learn and grow – new skills and the resilience to cope with future setbacks.

You can read more about revisiting your goals if they don’t seem to be working here.

Don’t try to change your world on day one

Ms Clothier, who is part of the Financial Mindfulness team says it’s important to ‘start small’.

Choose one area that you can become better organised.

Perhaps it’s organising your filing system, or becoming more organised with bill paying, or cleaning out your wallet.

“Finish that one task, then move on to the next,” she says.

“It will be less overwhelming and you’ll create momentum as you complete each task.”

Ask for help. If you’re not sure, ask others what they do? How they organise their finances or what apps they might use etc.

Once you’ve sorted them, keep on top of your finances on a weekly basis.

“Putting in a few minutes each week is much easier than taking a few hours each month, which can become daunting,” Ms Clothier says.

It will be easier to keep track of and stay organised if you do a little bit, often.

Clean up your admin to reduce shame around money

 Boring yes, but important? Absolutely crucial.

A basic as it sounds, getting organised starts will filing.

Set up a filing system – in your computer or online – to arrange all financial documentation be it electronic or paper.

Start with getting those bills organised into categories, e.g. Utility bills (electricity, gas, etc) in a separate folder.

Create folders in categories that mean you are more likely to pay attention to them – and not be able to ignore them.

A tidy system with money actually reduces our shame around money, which is incredibly valuable.

That in turn reduces the belief that we might not ‘deserve’ to have positive experiences with money.

Budget early and budget often – just do it!

 Instinctively, we know that budgeting allows us to manage money wisely, avoid financial stress, and be in control.

The simple answer to ‘why budget’ that it’s a habit that is always helpful to our financial situation.

Setting up the simplest of budgets is a big step forward to managing weekly, monthly and yearly expenses.

It’s important to note that budgeting is not easy. It is a commitment to a new way of thinking about money, and it adds a whole new layer to how we interact with money.

Budgeting is a high-level mindful money practice – it’s paying attention to what we earn, what we spend, what we need and our attempts to change for the better.

Succeeding means not giving up in the pursuit of this new life skill.

The proper motivation is needed to undertake this skill of being constantly curious about your money.

To make budgeting work you need to return to it every day to begin with, then at least every week – for a long time.

Budgets only work if they are realistic and if they are ‘live’ systems – so they need to be integrated into your daily life, reviewed and revised if they are not working.

Eventually you can review and revise your budget monthly.

Basic budgeting steps include:

    • Properly determining your household income;
    • Begin tracking your living expenses;
    • Balancing the budget;
    • Go back and review your expenses;
    • Review your income potential; and
    • Balancing the budget – yes again.

To learn more about how to budget, read on here.

An overlooked but essential element of budgeting is simply making time for it. Sounds obvious but it’s a budget killer.

“You must allocate a regular time to review what you have spent money on and what expenses might be coming up that are large or lumpy,” Mr Ferguson says.

We also have produced detailed material about maintaining a budget which you can find here.

The steps to maintaining a budget include:

    • Schedule your budgeting practice;
    • Make budgeting a game that you ‘win’ at;
    • Review the value of your money and simplify your budgeting;
    • Get smarter about your use of credit;
    • Get real about planning;
    • Experiment with ‘not spending’;
    • Nominate a budget buddy and get accountable; and
    • Become proactive – and stay positive.

Take the ‘risk’ out of your regular bills

Paying bills – including card and loan repayments, energy bills, groceries and other recurring obligations – are among our followers’ main contributors to financial stress.

For people who cannot ‘get on top of’ regular bills they are things to worry about, instead of what they should be: transactions that buy us safety, enjoyment or investments in our future.

When we are not clear or organised with bills they can become risks.

Not all bills are created equal. There are basic but significant differences many of us don’t consider when managing our money.

We need to learn the difference between regular and variable bills.

Some bills recur at the time for the same fixed amount (with perhaps usually small incremental increases). These include mortgage, rent, rates, insurances, car registration, school fees and health insurance.

Other bills are variable, meaning the payable amount and date due can changes significantly.

These include servicing a car, paying for trades to fix something in your home.

Even though you know they are coming, you won’t know exactly when they will occur or how much they will be. A vital first step in managing bills is to identify the difference: which bills are for your needs and which are for your wants.

Think carefully about this: is the bill for something you want or need?

Once you had done this background work, it’s time to set up a crucial action plan.

To get control of household bills it’s important to have a full master list of bills – including regular and variable. Note the likely amounts payable and likely due date.

Consider taking some time to think about those items that are essential, but not regular. Think about the frequency that you would like to plan for those items and what amounts you might need to put aside

At the beginning of each month, create a checklist (separate from your master list) of the bills you are expecting to pay and the approximate amount.

It is wise to do this not just for the current month but the following month as well.

This list can be handwritten or electronic. Allow space on your checklist to mark if the bill was received and when the bill was paid.

Ideally this is what you would do when bills arrive – either in your mailbox, inbox or by SMS notification.

    • Don’t ignore your bills.
    • When they arrive open them.
    • Read and ensure you understand them. Is the bill correct according to your records?
    • Check the amount and time to pay.
    • If it’s urgent, pay it as a matter or urgency.
    • Keep all your bills together so it’s easier to keep track of them and pay them.

Set aside some time each month to pay your bills in line with how often you get paid. An hour is usually enough.

Bills need to be paid on time – this is an absolutely critical point towards helping you get organised.

“As you have organised all bills into separate folders, create reminder’s to pay before the due date,” says Andrew Fleming, Financial Mindfulness founder.

Applying mindfulness to disorganised finances

There’s a tough but essential reality to face with your personal finances if you ever want to improve your situation.

If you don’t pay attention to your finances, they don’t usually improve.

This may seem obvious, but it’s important to acknowledge it, and then act on it.

Paying no attention to your finances, allowing them to become disorganised, will mean some form of financial stress, stress and eventually distress becomes inevitable.

Even if you don’t see this cost immediately – ignoring finances creates chaos, often placing pressure on relationships.

What mindfulness can do for your money

Mindfulness is not just about meditation, in fact some mindfulness experts argue a meditation practice is optional as its just one way to be mindful.

Mindfulness is all about is paying attention, and applying that to your financial situation by definition means paying attention to your finances.

There are no guarantees for anyone, but it’s likely that being mindful about your finances will improve them.

The first step though is beginning to pay attention and that includes noticing resistance you have to facing the true state of your finances, and acknowledging these uncomfortable feelings.

It may feel overwhelming to know where or how to being to re-organise or take back control of your financial situation.

Mindfulness as a practice helps you to bring your attention to what is happening in the present moment.

It enables you to approach the task at hand, in a calm and centred manner.

What is financial mindfulness?

At Financial Mindfulness we define being mindful about finances as being aware and paying attention to your finances, and that may mean seeking help.

If you also practice mindfulness meditation, it can help reduce the anxiety, stress or avoidance you feel towards your finances.

A meditation practice can bring you to a state of acceptance, and allow you to take control of your situation in the present moment, one task at a time.

These meditations can help you to shift any blocks or resistance you may feel towards your financial situation, and will also help you to get into a calmer frame of mind, to be able to plan what action you need to take in order to get back in control.

When you are calm, and relaxed, you become more able to approach the task at hand.

From a calm place you can make better decisions and see the path forward, of small steps to take.

Some realisations may become clear quickly, for instance, you may overcome resistance to one particular area of your finances that is disorganised, like you business expenses or your taxation.

How mindfulness helps you get into action with disorganised finances

To achieve positive change, it is essential to develop new habits to improve your finances.

Ignoring your situation or just hoping things will improve, won’t help you move forward, or take back control. Just like procrastinating won’t improve the situation either.

To get your finances organised, these are a few of the basic ongoing tasks you will need to practice on a weekly basis:

    • Opening mail and email about your finances;
    • Understanding your income;
    • Examining your spending and identifying where savings can be made;
    • Knowing the difference between your income and expenditure – and being able to know it in advance;
    • Creating a planner of when bills and repayments fall due;
    • Creating a budget, following it and maintaining it; and
    • Creating an investment plan.

You can begin to think about the small but significant practical steps that you can take towards transforming your finances from being disorganised to being organised and in control.

How mindfulness helps you get your mindset right

You can to use mindfulness firstly to help you visualise what it would feel like to be organised with your finances and the sense of ease that that could bring to your lives from a financial and emotional level.

In any behaviour change, you need to be connected to the underlying motivation in order to be inspired to take action to change a situation.

Mindfulness is a tool that can help you connect to your motivation, and keep you focused on the path to creating change or shifting behaviour. If you feel stressed or slip back into old habits, you can use mindfulness to bring your attention back to your present moment, and take action again in a more positive and healthy way.

Mindfulness reminds you that you need to pay attention to the present moment. For example, when you receive a bill in the mail, applying mindfulness would tell you to open that bill, make a note of it, or pay it, and then file it.

Mindfulness is also the tool that helps you track and pay attention to your spending habits, sticking to your spending plan and remaining on track with your goals and decisions.

It’s a tool that you can use to keep you focused on your actions and what you are doing in the present moment, to ensure that you stay on track.

Using a mindful approach to create new habits

Couple of pars here and dot points on what these habits are

Living with a mindful approach to money means paying attention to money at intervals required to stay organised – whether that means daily, hourly or monthly.

Some of these new healthy habits will include things such as:

    • Generally improving your financial literacy;
    • Remaining aware of when bills and repayments fall due;
    • Remaining aware of all your account balances;
    • Monitoring income and expenditure your income and expenditure;
    • Monitoring your spending behaviour for products and services that you are; not using – so that you can sell these items and cut these costs; and
    • Managing your investments on a regular basis.

You should also experience a reduction in bill shock and encountering ‘unexpected expenses’.

How mindfulness helps to keep your finances organised

Your relationship with money is a practice.

You don’t arrive at an organised state and remain there. It is the daily habits and actions you take that support you to be organised with your money.

A mindfulness approach to your finances requires you to pay attention to your daily habits with money in each moment.

So, you are always mindful of what you are doing and spending.

Disorganised finances

A persistent, nagging fear of money is all too real for many people.

The medical word for it is Chrematophobia, also known as Chrometophobia and its sufferers have a much higher likelihood than average to experience financial stress.

The individual reasons are probably as varied and nuanced as the number of sufferers, but it’s a reasonable assumption that we haven’t learned how to manage money effectively.

One way to consider the fear of money is to ask: how many with such fears are disorganised with their finances?

We’re not suggesting an answer to Chrematophobia – we’ll leave that to you, your financial counsellor, and even your psychologist.

But we can help encourage people to look at the widespread issue of disorganised finances.

Why does it happen?

For some, it will be deep-seated issues, and again, we won’t go into that. But it’s worth considering whether you do fall into that camp before considering the next point – and getting extra help if you do.

Avoiding our finances to the point they become disorganised can feel strangely empowering in the short term.

We all know that feeling: ‘I don’t have to do this difficult thing if I don’t want to or maybe ‘This is boring/hard/exhausting, so I’ll get back to it tomorrow/next week/next month’.

This is avoidance, with more than a little misguided rebellion at its heart.

Whatever is underneath our avoidance of maintaining our finances, the result is often the same: it’s a bit of an ‘own goal’.

‘It can be a bit like a teenager not wanting to clean their room. They don’t see a need for it,’ says Hamish Ferguson, a Director at Vision Property and Finance.

It is frustrating when they can’t find an important document or number, but unless it becomes a large enough pain point, people generally don’t – or won’t – understand the need and don’t make it important.

One thing we all have, of course, is plenty of distraction these days.

There are usually too many other things we believe need to be done now or make more important – and we focus on those instead of our finances.

“Examples could be keeping the boss happy, dealing with children or a spouse that wants attention or even just allocating time to more pleasurable activities such as TV, time with friends or outdoor activities,” says Mr Ferguson.

The link between financial stress and disorganised finances

If we don’t pay attention to our finances, they don’t usually improve. This may seem obvious,s but it’s important to act on it.

Paying no attention to our financial situation means some form of financial stress, and even distress becomes inevitable.

If you can’t see this coming, you probably need some new habits with money!

“Generally, the more stressed we are, the less logical we think and or the more disorganised we become,” Mr Ferguson says.

With a stressed mindset, we don’t tend to manage our time well because we spend more time on the stressor than the solution.

“We often fail to realise that being organised with money will reduce the time that we tend to think about money, which should give us more freedom and time to spend in more pleasurable areas,” Mr Ferguson says.

The importance of regular routines around money

The busier we are (or more’ time poor’ we are), the more important having healthy routines are.

Most people can recognise that sense of not having enough time in the day.

“So, building structure and routine around our finances is essential,” Mr Ferguson says.

Some examples of healthy routines with money are:

    • ​Review bank statements and credit card statements every month so we know what we are spending money on and the amounts;
    • Review repeating expenses and reflecting on whether we are using what we are paying for effectively. Gym memberships are a good example, as are streaming subscriptions;
    • Compare bills to prior ones so that you can be aware of any increasing expenses and spend some time thinking about why this is occurring;
    • Review all significant items that may need to be renewed over time. This could be a car, fridge, hot water system, maintenance on the house. Come up with an estimated time before money would need to be spent and start to put a savings plan in place around this; and
    • Start and maintain a budget.

What’s a good place to start if my finances are disorganised?

“Being disorganised with finances is often an indication that bills are not being paid on time, savings are limited (or even non-existent) there isn’t a savings habit or goal,” Mr Ferguson says.

When we experience any bill as an unexpected expense, we need new habits with money and quickly.

In the most basic terms, a person disorganised with finances often doesn’t know how or where to allocate money helpfully over the long term.

Becoming organised would mean thinking about the following:

    • Knowing where all my documents and paperwork are – physically, digitally and online;
    • Having a regular time to sit down and examine the bills or expenses that I am incurring;
    • Understanding what my costs in life are;
    • Having financial goals; and
    • Managing the difference between my income and expenses

Once or twice a year, it is helpful to sit down and analyse three months’ worth of transactions.

If this seems too onerous, looking at some software to help you be proactive here may be worth considering.

Also, many banks now offer basic cashflow analysis.

“Are you using the free tools available to you? There are plenty,” Mr Ferguson says.

A final word on goal setting.

‘This is very, very important,” he says.

Financial goal setting actions can be as simple as looking at major expenses on the horizon and breaking down the need into weekly or fortnightly amounts to putting away can help become organised.

But they can also be empowering when we look forward to what we want to do with the next 5-10 years: buy a property? Travel? Open a business?

The possibilities become almost endless when our finances become organised, and we can start making financial goals and achieving them.