The short answer to why is organizing your finances important: Organizing your finances will not only help you set up for your future, but it will also change your day-to-day habits, allowing you to reap the benefits that result from successfully managing your own finances from cutting credit card debt to understanding your bills more.
I know, it might seem like a daunting task. But if it's like anything else that you know you should do but continue to procrastinate actually doing. If your sock drawer is organized, you won't feel annoyed or irritated in the morning when you’re looking for that pair of socks. When your finances are organized, you won't feel overwhelmed and irritated when it comes to your money and how best to manage it.
Top 3 Reasons Why Organizing Your Finances Is Important
1. Make sound spending decisions and good investment choices.
- If your finances aren’t organized, you’ll often have more month than you have money—you’ll run out of money before that next paycheck comes. This is a big reason why organizing your finances is important. When this happens, you’re more tempted to use credit cards to pay for expenses, you can get behind in bills, you’ll get frustrated and just give up (and buy ALL the things!), and the domino effect continues...leading to long-term issues like low credit scores (which can affect you for years) and mountains of debt. And it’s hard to invest—both short-term and long-term—when you don’t have the extra money to do so or don’t even know if you have the money to do so. And most importantly, when your finances are disorganized, you won’t be able to do all the things you’d like to do that require money: travel, buy a house, help others, retire, and other things that are important to you.
- If your finances are organized, you’ll know exactly what money’s coming in and going out, and you’ll be well aware of your expenses, all of which allow you to be proactive when making spending decisions. And here’s a bonus: You can actually have money left over after you’ve met your obligations for savings, travel, helping others, emergencies, and other more immediate things where money comes in handy. You’ll also be able to plan for the future, and you’ll be in control of your money and have it work for you instead of against you.
2. Pay down credit cards and other debt faster.
- When you’re thinking about how important it is to organize your finances, remember that when they’re unorganized, you’ll probably get caught in the credit card trap and incur loads of other debt, which can take literally years to crawl out from under. Those loads of debt can affect your ability to buy a house and other larger expenditures, and they can also affect your ability to take care of the day-to-day needs of life. And if you’d like to set aside money for the things you’d like to do and for long-term investments? That’s probably NOT going to happen.
- When your finances are organized, you probably won’t have as much debt, and if you do have debt (house, cars...those larger ticket items), since you’ll know your income and your outgoing expenses, you’ll also know how much of your money is extra that you can put towards paying down any debt faster. Adding even a few dollars a month to your regular payments can save you hundreds and thousands of dollars in interest costs! That’s more money in your pocket!
3. Organized finances = additional wealth.
- When your finances aren’t organized, additional wealth will not happen. It’s as simple as that. If you can’t see all the parts of your financial picture, how will you even know what is extra and what is not? And like I talked about in #1 above, the chances of you having any additional money, let alone enough to qualify as “wealth,” will also not happen unless you’re bringing in a lot more money than you’re spending. And even then, you will still have no clue as to what’s going on in your financial world. No clue = no wealth.
- When your finances are organized, you can make the most out of the hard-earned assets you create through both sound short-term and long-term planning. And planning, no matter your income, can lead to additional wealth, allowing you to take care of all your responsibilities and those things that you dream of using that hard-earned money for like travel, a house, cars, retirement, helping others, “fun” things, and so much more!
While taking the time to organize your finances is probably at the very bottom of your to-do list, making time for financial organization can pay off in not only more money in your accounts, but you’ll also feel less stressed and be able to enjoy life much more. And isn’t that the way we’d all like to live?!