3-Step Organizational Plan to manage your money - Part 2

In Part 1, I outlined 3 steps we use to organize our budget.

1. List your income
2. List your bills
3. Subract for spendable cash.

In this post, I want to expand on those three steps. I thought I had this post done earlier. But I showed it to my wife who has successfully explained our system to several people and she gave me the equivalent of a kiss, or K.I.S.S. (Keep is Simple Stupid) So I'll try again.

My net income is the same every week. Net income is what you need to consider. Include child support, Social Security checks, Pension, or any other income you might have after taxes. If you have more than one income, include them all.

So I list my net income. However, every other paycheck I might get a bonus. Since the bonus is not guaranteed, we do not count that in our income to apply to our monthly bills. If there is a bonus, it is exactly that, a bonus. We are just that much ahead. But if I don't get a bonus, we aren't cutting ourselves short because we were not planning on that for our budgeting purposes. So my income is simply listed in two columns for the 1st and 15th because that is when we pay our bills. Then we list our expenses under those two columns. On the 1st we list the bills that we need to pay before the 15th paycheck will get deposited. Under the 15th we list all the bills that are due before the 1st of the month paycheck will get deposited. Then all we need to do is subtract to find what spendable cash we have left for that two week period.

When you are done, it may look something like this:

Income: 1st of Month _____________ _______________

Bills: 1st of Month
Rent or house payment______________
Credit Cards______________________
Groceries________________________
Gas (Cars)_______________________
Cell Phone_______________________
Savings_________________________
Total Bills: _____________________ _______________

Spendable Cash: ________________ _______________
==================================

Income: 15th of Month ___________ _______________

Bills: 15th of Month
Car Payment ____________________
Groceries _______________________
Gas (Cars) ______________________
Utilities ________________________
Savings ________________________
Total Bills: ____________________ _______________

Spendable Cash: _______________ _______________

It is quite simple. When you deduct total bills from net income, what you have left is spendable cash. If there is no spendable cash left, obviously you need to lower your bills or raise your income. Looking at your finances this way gives you a quick look at where you are. Whenever your income or a bill changes, it is easy to update the chart and you know again exactly where you stand. You can write this chart on a piece of paper, or create a Excel spreadsheet. The important thing is to do it. Happy spending!

A 3-Step Organizational Plan to manage your money

Our simple budgeting process grew out of necessity. As the 17th Century Irish Poet, George Farquhar, said, "Necessity, the mother of invention".

When I started graduate school shortly after getting married, my wife got a job to "put me through school." We soon discovered there was "too much month and not enough money." We needed help! Luckily my wife was able to find a better paying job. But this cloud also had a silver lining. We discovered a very simple way to manage our money which we call the 3-STEP PLAN. We have used this ever since with great success.

Here is a very simplified version of our money management system:

1. List your income.
2. List your bills.
3. Subtract to calculate your extra, spendable cash.

I know this sounds way oversimplified. However, I am surprised at how many people I talk to who have never taken the time to do this simple process and are constantly in financial trouble. A little organizing of their finances using this 3-Step Plan could help them a lot.

There are of course many variables to these three steps. I will expand on our budget organization process over the next few days. So check back for further explanation of our budget system.

By the way, while searching for the author of the first quote above, I ran across a handy site to find quotes. There you can search for over 300,000 quotes by over 20,000 authors. Some people have taken the time to organize quotes for us. How nice!

Organize your email and/or gmail

When I got my first Internet account, it was exciting getting email. In fact, the first email I received was one I sent to myself to see if it worked. At that time the "Inbox" was all I knew. Every email came into my inbox. This was back in the days of dial-up for me. It was exciting waiting for the buzz as the computer dialed up my Internet connection and watching to see if any emails came in. That wasn't a big deal until the spammers got hold of my email address. Then it started taking forever for my emails to download. And I got tired of paging through tons of emails only to discover that I didn't get anything important that day.

Eventually I discovered that Microsoft includes the ability to create new folders and "message rules" which allowed me to direct incoming emails to separate folders. For example, all emails from family members go directly to my "Family" folder. That helps because I don't have to look through all the incoming emails just to see if there is one from a family member. If you haven't discovered that yet, your email program should allow you to do that. In Microsoft Outlook Express, for example, go to File/Folder/New and create the folders you want. Then go to Tools/Message Rules to create the filters you need. Or if you have an email open, you can go to Message/Create Rule from Message. That will help keep your inbox empty.

Eventually, waiting for the dial-up to download emails got too tedious. I was envious of my son who had high speed service. He finally convinced me (and my wife who needs more convincing than I do) to switch to Roadrunner. My Roadrunner account has EZ anti-spam which does a good job of filtering out spam and sends it directly to a Spam folder where it is autaomatically deleted after 30 days. So my Inbox is basically always empty except for a few spams that sneak through. At that point I can click on "Block" on the EZ-Anti-Spam button, and it is gone.

Then my son, Brian, introduced me to gmail. This Google service works great for email. It puts emails in threads, so when I reply to a gmail and they reply back, it keeps them together like an ongoing conversation. I now use my gmail address whenever I'm asked for an email address. Gmail does a good job of filtering out spam. If something sneaks through, I click on "Report Spam" and it goes to the spam box.

Brian later pointed out that I can put labels on incoming gmail. It is a simple process of clicking on "Create a Filter" and following the instructions. After setting that up, I can now click on a label and see everything in that folder. Brian probably figured I would be able to figure out the next step by myself, creating filters to automatically direct them there. But later he had to point that out as well. It seems pretty basic, and I should have figured it out by myself. But I didn't. He is smarter than me and figures these things out by himself. That's one of the reasons he is referred to around the country as "The Brain," A.K.A. Mr.OneBox.

So following his instructions, I set up filters to automatically archive my gmails and apply labels. Now I can instantly see if I have any new gmails in any of my labeled categories. And my inbox is always empty. No sorting through a bunch to see if there is anything important. Important gmails automatically go where I want them.

Maybe you already have your email or gmail accounts all organized. If you don't, I would highly recommend it. It will save you a lot of time that could be spent on much more important or fun things. So spend a little time organizing. Then when your inbox is empty, take time to have some fun.

Organize your file system

A filing system can be good or bad. I see some files that make it harder to find things than if they were all just laying in a pile. The file folders are in a random order. The labels are scribbled and faded, and therefore hard to read. The tabs are ragged and bent over so they can't even be seen. That all makes for a big mess, and can make a person feel very unorganized, especially when looking for something you know is there and it can't be found. This post will focus on creating a filing system that is easier to use, rather than organizing the contents of the files. Organizing the contents can be a later post.

Several years and two jobs ago, I converted to hanging file folders. Earthwise(R) Hanging File Folders That was an immediate huge improvement. Hanging file folders are much easier to look through. They don't fall backwards or forwards with all the rest of the folders. If there are not too many files stuffed into a drawer, the contents can be seen without even taking it out of the drawer. It works much better than just having a bunch of file folders sitting in a drawer or box. Plus the file folders have tabs which sit up above the file folder far enough to actually be seen. It didn't take me long to switch to hanging folders in my filing cabinet at home.

Some file cabinets are set up for hanging file folders. If yours are not set up for hanging file folders, a frame can be purchased to convert any file cabinet for use with hanging file folders.

Oxford(R) Hanging File Folder Frames

Hanging folders, however, don't eliminate the scribbled file labels which don't look real professional and can be hard to read. I like things to look neat and tidy. That's where a viewable labeling system is helpful.

Smead(R) Viewables(R) Color Labeling System Starter Kit For Hanging Folders

This system includes plastic tabs which stand upright. Software is included to print labels along with plastic protection sheets which make the labels last much longer. I use a color option version which can print colored labels to further categorize my files. It makes a file drawer a pleasure to look into.

At a previous job, the files were a mess. Rag-tagged beat up folders and faded scribbled tabs made it hard to find anything. I told my regional manager that I would like to convert their files to hanging folders with viewable labels. This company wasn't into spending cash for extras that they hadn't thought of, so I wasn't sure what response I would get. After I explained what it would be like compared to the current system, I got the go ahead. It wasn't long and the word had spread. Other stores were doing the same. It seems like such a simple thing, but it sure made a difference.

If you're having trouble finding things in your filing cabinet, or hope no one is looking when you open the file drawer, consider upgrading your file folders to hanging files. And I would highly recommend the viewable labeling system. If you like things to look neat and be easy to use like I do, you'll appreciate the time spent converting over. It would be a nice thing to do for yourself at the beginning of a new year.

Organizing for tax time

It is not too soon to be getting ready for tax time. Actually, this should have been started a year ago for this year's tax season. Hopefully you have done some tax organizing and filing for this tax season throughout the year. I remember my Dad's system when it came time for tax season. In our old farm house, we had a living room in between the kitchen and parlor. For several days, we couldn't do anything in the living room because the table and floor were filled with papers, boxes of receipts, canceled checks and bank statements. It seemed like it took him forever to wade through everything, sorting, tossing, making lists. Finally he was ready, threw it all in a big box and went to his tax preparer. That was not a pleasant time for the family.

My taxes are much simpler. But I think my tax tracking system would have served him well if it were available at the time. He didn't have a computer and tracking software I use. But I think he could have used a filing cabinet to better advantage. When it is time to go to my tax preparer, I just pull a file from the file cabinet, run a report on my computer, and I'm ready to go. It's that simple. I'll share my tracking system later in this post.

If you have not done any tax organizing throughout the year and put it all in a box like my Dad did, then you can still take out the box and follow the filing and/or tracking procedures listed below. This will work whether you do your own taxes, or use a professional tax preparer.

When you get your receipts for business purchases, medical or dental treatment, household expenses, etc. you should decide immediately if it is a tax related expense. If it is, save it in a "Tax Receipts" file. If you don't have one, buy a simple filing cabinet. If the receipt has nothing to do with income tax issues, then decide immediately what you will do with it. If you don't need to save it, then toss it. There is no need to wade through tons of receipts later, only to toss them at that time. My dad had a huge waste basket that needed to be emptied several times during his "tax time" because he had saved everything. If you need to save a receipt for a warranty, for example, then file it in a "Warranty File." Decide then and there if it needs to be filed, then file it rather than putting everything in one big box to go through at the end of the year.

If your Tax Receipts need to be further separated, make separate tax-related files. You can have files for "Medical-Dental," "Auto Expenses," "Taxes Paid". Think through your "Itemized Deductions" form from your last tax filing and you will get a good idea of how much you need to separate out your tax receipts. If there are just a few, they can all go in one file. More on tracking them in a bit. Just be patient please. If you save some receipts for purposes other than taxes, you can have an "Auto Expenses" file and a "Taxes-Auto Expenses" file, for example. Whatever works for you to be able to find them later when you need them, do that. The simpler the better. But do it, and stick to it. It doesn't need to be perfect right now, but it has to be started. You can perfect it as you go, deciding what works and what doesn't.

Starting soon, you will begin receiving W-2s, Interest statements, etc. Be sure to file them away immediately so you don't lose them. You will need all these tax related statements whether you use a tax preparer or do your own taxes.

Now for my tracking system. I use Quicken to track all my tax related income and expenses. There is a 2007 version out, Quicken(R) Deluxe 2007 Whenever I have a tax related expense, such as a medical or dental expense, I enter it in Quicken. It will let me assign a category, such as "Medical." At any time during the year, or at tax time, Quicken can run a report for all tax related items, dividing them into each category I've assigned. So if I want to know how much I have in medical expenses, it will run the report listing each entry, who the medical provider was, the specific category, and amount. Then it gives a final total. When it is tax time, I simply run that report, grab my "Tax File" and head to my tax preparer. She simply enters the information from the report I've run, and I'm done. It is really quick and painless. The reports can be customized in many way, which really makes tax time easier. Business and household expenses can all be tracked separately simply by assigning appropriate categories. No fuss, no muss.


If you like to prepare your own taxes, TurboTaxTurboTax Basic 2006 - complete package works very well. I used it for a number of years with great satisfaction. Once you've organized your tax receipts and run your reports, it is easy to plug in the figures.

Again, if you haven't done any organizing, it is not too late to start. It will take a little longer the first time to get files set up, etc. But once you've got that done, it will be much easier. Tax time doesn't have to be the headache we usually make it. A little organizational effort along the way will pay big dividends in the long run.