by Kelly Gabriel
Thinking about how to prevent financial problems might make you wonder where the challenges start. That’s not always easy to figure out because they can arise for a variety of reasons – such as overspending, overusing credit cards, or not planning for expenses. Although any one of these issues may seem to be the cause, all too often the root problem lies with not knowing how to organize your finances.
If you can’t find your credit card bills, you won’t know when your payments are due. If you have automatic payments coming out of your bank account, without a pay cheque plan you might face NSF charges if your payments bounce. Or if you have debts that have gone to collections, your credit rating could take a serious turn for the worse. The simple truth is that many Canadian families don’t really know what it means to get their financial houses in order. It’s not as simple as saying that a lack of financial education is a real problem in society.
If you’ve often asked yourself “how can I organize my finances?” you need not look any further. Here are 5 simple things you can do to establish some order so that you don’t need to deal with financial problems.
Keep All Your Financial Paperwork in the Same Place
Organizing your finances is much easier than most people think, and the first step to establishing order is to create some sort of filing system. Something as simple as a banker’s box with folders, an accordion file, or even a filing cabinet works great. If you receive most of your bills electronically, organize your “paperwork” with an online system. It can help to download actual statements rather than logging in to each account separately.
As you receive your bills, statements, and contracts, file them in the appropriate folder after you’ve looked through them. Then the next time you need a statement or bill, you’ll know where to find exactly what you’re looking for. Staying organized is an important part of your money management system because it helps you stay on top of what you owe and when it’s due.
Check Your Statements for Inaccuracies
Unfortunately, credit card fraud and identity theft are prevalent these days, and it’s for this reason that you should go through each of your statements carefully before filing them away. When you’re going through your statements, be on the lookout for any signs of fraudulent activity.
If you find any unauthorized transactions, contact the service provider right away. For instance, call your credit card company immediately to dispute an unauthorized purchase. Reporting the potentially fraudulent charges sooner rather than later will allow the credit card company to investigate the transactions, and it will also put you in a better position to have those charges reversed. For utility bills or cell phone invoices, contact the customer service department right away. Scams can be tricky to spot so catching a potentially fraudulent transaction on your account is key to stopping a scammer in their tracks.
If unauthorized purchases on your credit card go unnoticed and you don’t report them within the grace period, your credit card company will assume you are accepting responsibility for those purchases, and they will hold you liable for payment. If you choose not to make a payment, this will reflect negatively on your credit score. Yet it also doesn’t make sense to pay for something you never purchased.
To prevent serious financial problems like this from happening, check all of your statements carefully when you receive them, and make sure you report any suspicious activity promptly.
Mark the Due Dates for All Your Payments
Once you’ve organized your bills and you know which creditors to pay, the next step is to set up money reminders for yourself so you’ll always stay on top of your payments. The easiest way to do this is to make a checklist for all the bills you’re expecting, accompanied by their payment dates.
Then using an agenda, a wall calendar, a smartphone app, or a Google Calendar notification, mark (or set up an alert for) two things:
- A reminder to pay an upcoming bill payment, set at least two weeks ahead of the due date.
- The actual payment due date. Whether you decide to use a traditional calendar or a more tech-savvy application, they will serve the same function: it will help you remember where your money needs to go, and on what date, so you’ll never make a late payment again.
Another option that can help streamline the bill-paying process even more is to set up automated bill payments through your online banking. You can automate payments and transfers, so a predetermined payment amount gets made on a set day. This way, you can avoid the potential problem of missing a payment. By setting up the recurring payments through your online banking system you remain in control of your bank account. This is much better than allowing companies to debit your account on a certain date each month. If you aren’t sure how to set this up, contact your bank or credit union; they’ll be happy to walk you through it.
Update Your Contact Information with Your Financial Institution
Your email address, mailing address, and phone number are the main lines of communication between you and your financial institution. If the companies you deal with and your financial institution do not have your correct information on file, they will not be able to inform you of any changes or activity taking place on your account. This could leave you with some unwelcome surprises and unexpected problems.
For example, if your financial institution mails out a notice regarding a new fee structure but you forgot to update your mailing address, you won’t be aware of the new fee getting charged to your account each month. Or, if your credit card has been compromised, the credit card company may call your outdated phone number with the intention of informing you of a hold they’ve put on your card. Having missed this safety precaution, you’ll be in for a rude awakening when your card suddenly gets declined as you’re trying to make a purchase.
When your contact information changes it’s up to you to provide your bank, creditors, and other companies with your new information. It’s not only important for your personal finances, but it’s part of the agreement you made when you signed up for the service or product.
Communicate with Your Creditors
If you’re in financial trouble and find yourself unable to keep up with your debt payments, it’s essential that you communicate with your creditors as soon as you can. More often than not, your creditors will be willing to negotiate a payment arrangement to help you ease your debt repayments, and they may even suggest solutions to improve your situation before you end up in an even tighter spot. If you don't let your creditors know about your financial problems, they won't be able to help you. You could then end up falling behind on your payments and digging yourself deeper in debt.
Before contacting your creditors, work out a budget that shows clearly how much you can realistically pay before your situation improves. Creditors are often open to negotiation because their ultimate goal is to recover the money you owe them, so it’s important that you’re realistic with whatever you propose – don’t commit to more than you can afford to pay. However, if your creditor isn’t able to help you ease your debt repayments, another solution is to make an appointment to meet with an accredited, non-profit credit counsellor. They’ll go through your finances, help you with budgeting, and present all of the debt relief options available to you so that you can get your finances back on track.
Preventing Financial Problems Starts with Getting Organized
When financial disorganization is at the root cause of your financial problems, the good news is that organizing your finances isn’t as hard as you might think. Once you overcome this common difficulty, not only will you stay on top of your payments and improve your financial situation, but you’ll have a sense of wellbeing. Money matters won’t bring on as much stress and anxiety anymore, so you’ll have more time to focus on the things that bring you joy and satisfaction.