If you’re wondering what the best ways to organise your finances are, there’s a chance you’re looking to relieve the stress and anxiety you feel around money. When things are disorganised and messy, problems can feel insurmountable. But with Loqbox’s tips and advice, you can get your finances in order and take charge of your financial wellbeing.
Financial wellbeing means feeling confident that you can cover your monthly costs, plan for your future, and deal with short-term financial emergencies, all without giving up the things you love. Sounds too good to be true, right? But it’s actually simpler than you think. Here are 11 things you can be doing right now to organise your money.
11 best ways to organise finances
1. Make a budget
It might sound boring, but creating a budget is well worth the time. And it’s probably not as hard as you might think! Start by noting down all of your regular outgoings - including utility bills, rent or mortgage, credit card repayments, and essential food shopping - and hold them up against your income. Remember to include the income and outgoings of anybody who is financially connected to you,too.
Obviously you want your income to be greater than your outgoings. If it isn’t, it’s time to look at reducing what you’re spending. But even if it is, you’ll probably find that you could trim some of your non-essential monthly payments without too much impact on your life. Is there a streaming service you don’t really watch? A gym you never go to? Regularly reviewing what’s going out of your account is a great way to stay on top of those monthly payments.
A great budgeting rule that you can work towards is the 50-20-30 rule. Take your total post-tax income and break it down into 50% for what you need (rent, mortgage, debt repayment, bills), 30% for what you want (going out, clothes, and treats), and 20% that you can put towards your debts or savings. You can read about more budgeting rules here.
2. Open two accounts
Organising all of your money from one account is tricky, and it’s easy to make mistakes if your Direct Debits come out of the same money pool as your daily spending. So why not open a second bank account, or use money pots on financial apps to organise your personal finances (more on that later)? Splitting out your finances into the essentials and non-essentials can make it easier to visualise how much money you’ve actually got.
One account can deal with all of your essential payments, like your mortgage, credit card minimum payments, groceries and energy bills. Set up Direct Debits from this account so that the money goes out automatically where possible. The other account is for your daily spending, like going out, buying clothes and having fun.
Setting up two accounts means you won’t accidentally spend your electricity bill on a meal out or a new pair of shoes! You can even set up a third account for your savings, so using the above budgeting rule, you could have one account that takes 50% of your income, one that holds another 30% for spending, and a third that collects 20% into a higher interest account.
3. Automate your money
Make a payday routine and automate it. Why stress about remembering to do something every month when you can get Direct Debits to do it for you? When your Direct Debits are set up properly, you don’t even have to think about it. Automate your money to spread between your separate accounts, and set up Direct Debits to pay your bills.
If you get paid the same amount on the same day every month, set up your Direct Debits to come out on payday. That way, your money will be sent to your different accounts and your essential payments will already be sorted before you can even say “treat yourself”! Direct Debits are there to make your life easier, so use them.
4. Pay yourself first
Much like using Direct Debits to make sure that your essential payments are covered, you should prioritise working towards your financial goals before spending money on non-essentials. It’s important to invest in yourself.
5. Pay your bills on time
If you’ve automated your bills, you should have this covered. But it’s really important to make sure your bills are paid on time. If you pay your bills late, you risk getting charged late payment fees. When you’re thinking “what’s the best way to organise my finances?”, paying more than you have to means you’re taking two steps backward.
Don’t let your finances snowball by ignoring payment dates. Even just one or two can have a knock-on effect. Late payments can also affect your credit score, which could make using credit more expensive for you in the long run. Getting the best deals on credit can save you thousands in interest payments.
6. Avoid bank charges
When you create a budget, it gives you a view of how much you can spend to stay within your means. This is really important when you’re trying to organise your finances. When you spend more than you can afford you risk going into your overdraft.
You might be thinking that’s what the overdraft is for. And it is. But the interest rates for using it will likely be quite high. So unless it’s an emergency, you should avoid using it as much as possible. Try to think of £0 as a target rather than your overdraft limit.
If you live within your overdraft - as thousands of people do - try to think of it as a debt that you should be paying off as quickly as possible. Set aside some money every month to stay within your account to reduce it. Paying unnecessary interest is a waste of money and will make organising your finances harder.
7. Organise your paperwork
Keep all your bills in one place. You might need them to query mistakes on your bills. You can also check them against your monthly finances to make sure that everything is in order. If you’re self-employed you’ll need to hold on to seven years’ paperwork (like receipts and invoices). So make sure you have the right sort of storage that can be protected with a lock, and securely shred any sensitive documents that you might be clearing out.
A lot of people now use paperless bills and receipts so get everything into some password-protected folders on your computer or device. Separate the folders into tax years and make sure to name them properly. It can be a bit dull setting it up, but when you desperately need that one piece of information in the future you’ll be so glad you got it done!
8. Financial apps
As mentioned above, using different accounts to separate and organise your money into your budgeting rule can be really powerful. But you can also use financial apps. Some banks’ apps provide digital “pots” that you can use. But there are also separate financial apps that will give you other useful tools. Do some digging, and look for the option that best suits your personal preferences.
9. Get financially literate
Many of us aren’t really taught about money at school. There are thousands of financial products commercially available to us. We’re sold on the benefits but not always made fully aware of the risks. Financial literacy is about understanding the financial products and options that are on the market and avoiding fraud and scams.
Financial literacy isn’t about being clever. It’s about knowing how to make the most of your money. If you’re financially literate, you’re more likely to be able to invest your money or benefit from better deals and interest rates on credit and save yourself thousands over years.
To get started, why not check out Loqbox Learn? We’ve given you the lowdown on tons of topics, from how to save like a pro, to finding the best bank account for you.
10. Prioritise your debts
Pay your debts off first. When you get your budget in place, it can be tempting to throw any extra money into savings. It makes sense. You want to see that pot of money grow. It can feel much more rewarding than seeing your money disappear into a loan or credit card. But the sooner your clear and manage your debts, the easier it will be to organise your money.
The interest rates that you pay on debts will normally be far higher than the interest rates that you earn on your savings. It could be the difference between paying an extra 39% APR on a credit card and making 2-3% interest on a savings account. So prioritise your debts wherever you can.
11. Check your credit scores
Your credit score gives you a simple and clear summary of how lenders view your credit history. When you apply for credit, like a mortgage, credit card, or personal loan, the provider will often do a hard credit check on you to decide whether they’re willing to offer you money and at what rates. This means they’ll be looking at the information on your credit history.
Your credit scores are calculated by the top three credit reference agencies (CRAs) in the UK: Experian, Equifax and TransUnion. As said above, having the best possible deals on interest rates can save you thousands in the future, so it’s worth making sure that your credit score (and, therefore, your credit history) looks as healthy as possible.
If you don’t know all three of your credit scores, you can check each one for free and without impacting them, using one of these recommended services:
*By the way, if you do sign up for ClearScore using this link they give us a small commission.
If you’ve checked your credit score and it’s not as high as you’d like it to be, don’t panic! There’s a proven way you can make it grow quickly. Get started with Loqbox! A Loqbox membership gives you access to tons of great credit-building tools, but by activating Loqbox Grow,we report your £2.50-a-week Loqbox membership payments to all three CRAs in the UK. This means your credit score could be blooming in no time!
Improvements to your credit score are not guaranteed.
How to organise finances as a couple
Wait, do these steps still make sense if you’re organising your finances as a couple? Yes, they do! But there are some additional things to think about for couples that we wanted to mention here as lots of peoples’ finances are linked to at least one other person.
A big question for lots of couples is whether they should open a joint account. A joint account is like a regular bank account, but both your names are listed and you’re both able to deposit, withdraw, and make decisions about the money held in the account.
Joint accounts can be super useful ways of organising finances as a couple. But it is sensible to keep it separate from your daily spending account. You can set up Direct Debits from your personal accounts into the joint one and pay your bills and living expenses out of it. This way your contributions are fair and automatic.
Opening a joint account, and linking your names with somebody on utility bills means that you are co-scored for your credit scores. If you, or your other half, have good credit it can actually give the other one a boost. However, it works the other way round too. Linking with bad credit can impact negatively on your credit score. Something to be aware of!