Top 7 Tips for Financial Organization

As we embark on a new year, the pursuit of financial success often ends up as a New Year’s resolution. One crucial aspect that can’t be overlooked is the role of organization in achieving our monetary goals. We will explore seven essential steps that serve as a roadmap to financial success, covering everything from goal setting to debt management.

In the book Atomic Habits by James Clear (worth the read!), he outlines four key principles or “laws”. 

The 1st law(Cue): Make it obvious. 

The 2nd law (Craving): Make it attractive. 

The 3rd law (Response): Make it easy. 

The 4th law (Reward): Make it satisfying. 

Many of these principles align with financial goal achievement. Let’s take a closer look.

1. Set Goals/Make it a Habit – Savings, Spending & Investing

The foundation of any successful financial plan lies in setting clear and achievable goals grounded in habits. Categorize your objectives into savings, spending, and investing. Whether it’s building an emergency fund, saving for a dream vacation, or investing for the future, defining your outcome provides direction and purpose to your financial journey. Setting goals falls under the 1st law, Make it Obvious. Get it out in the open. What are you saving for? Why choose to spend money in one place versus another? What and how are you investing? Get specific.

2. Budget – Income vs. Expenses, Purchases Large and Small 

Creating a budget is akin to having a financial compass and as far as Atomic Habits goes this also falls under – “Make it Obvious”. In the end, it is empowering and confidence building to know what you can spend and what progress you are making toward a savings goal. Get clear on your income and expenses, accounting for both big ticket purchases and everyday expenditures. This step not only helps you understand your financial standing but also allows you to make informed decisions about where your money goes, ultimately paving the way for effective financial planning.

3. Savings – Emergency Fund, Down Payment, Car, Education 

Diversify your savings by earmarking funds for various purposes. Establish an emergency fund to cushion unexpected blows, save for a down payment on a house or a new car, and allocate resources for educational pursuits. A strategic savings plan ensures that you are prepared for life’s uncertainties while also working towards your long-term financial aspirations. If you are able to create good habits around saving, you can “Make it Easy”, meaning you can more easily meet your financial obligations, taking what was stressful to something that you can take in stride.

4. Spending(Travel/Leisure) 

While fiscal responsibility is crucial, it’s equally important to allocate funds for life’s most enriching experiences. Budget and plan for “fun” expenses, allowing yourself the joy of exploration within your financial means. An argument can be made that knowing that you can afford to add that snorkeling excursion makes it that much more fun. This balance between saving and spending on leisure ensures a holistic approach to financial well-being. If you link saving and spending to specific goals, you “Make it Attractive”.  Planning and saving for a trip to Turks and Caicos just makes the whole adventure feel so much more exciting and doable.

5. Invest 

Investing is best done in the long term. There are a few Atomic Habit laws that apply here. The first is to “Make it Simple”, automating both your savings and investing is critical.  

Whether it’s your 401k or a brokerage account, consider setting up automatic contributions directly from your paycheck or having it withdrawn from your checking account on payday. If you don’t see the money, you’re less likely to miss it. “Make it Satisfying” also applies as you grow your assets over the long term and earn interest on your interest. All that you have accumulated through long hours of work, is now working for you. It is the power of compound growth, which Albert Einstein once described as the “Eighth Wonder of the World”. Effective investing involves a lot of factors, and if you’re not an expert, it’s wise to collaborate with someone who is.

  • Research: Knowledge is power when it comes to investing. Dedicate time to research various investment options, understanding the risks and potential returns associated with each. This informed approach lays the groundwork for smart and strategic investment decisions. Having an understanding of what is happening in the economy, world financial markets and geopolitically will help you in every step of the process.
  • Choose Investments: Building on your research, carefully select investments that align with your financial goals and risk tolerance. Whether it’s stocks, bonds, or other investment vehicles, a diversified portfolio is key to mitigating risks.
  • Monitor Portfolio: Investing is an ongoing process that requires regular attention. Monitor your portfolio, making adjustments as needed to stay in line with your financial objectives and adapt to market conditions. A proactive approach ensures that your investments work effectively towards your long-term goals.

6. Maximize Company Benefits 

Companies look to get as much out of their employees as possible through compensation and benefits.  It’s crucial to view these benefits as integral components of your total compensation and they should be maximized.

  • 401k Company Match & Profit Sharing: Take full advantage of the benefits offered by your employer. Contribute to your 401k to maximize company matches and profit-sharing opportunities, providing a valuable boost to your retirement savings.
  • Take Advantage of Student Loan Repayment Programs: If available and you qualify, explore and utilize any student loan repayment programs offered by your employer. This can significantly alleviate the burden of educational debts, freeing up more resources for other financial goals like saving and investing.
  • Choosing the Right Health Insurance Plan: Carefully assess and choose a health insurance plan that suits your needs. Understand the coverage, deductibles, and copayments, and take advantage of any wellness programs offered by your employer. A well-considered health plan protects both your health and your wallet.

7. Plan to Pay Off Debts:

Paying off debts falls under, “Make it satisfying”. Whether it be paying off your mortgage, education or a boat, making that final payment is gratifying.

  • Student Loans: Develop a strategic plan for repaying student loans, taking into account your financial situation and available repayment options. Tackling student loan debt head-on is a crucial step towards financial freedom.
  • Consumer Debt: Credit Cards: Addressing credit card debt requires a clear and disciplined approach. Develop a repayment strategy, consider consolidating high-interest debts for a more manageable plan, and commit to reducing and eliminating consumer debt. This proactive stance puts you on the path to financial stability.

In conclusion, the road to financial success is paved with intentional and organized steps. By setting goals, creating a budget, saving strategically, balancing spending, investing wisely, maximizing company benefits, and tackling debts head-on, you empower yourself to take control of your financial future. As we embrace a new year, let these seven steps guide you toward a more secure and prosperous financial journey.

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Sources: Atomic Habits, James Clear, 2018
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