The Awesome 8-Step Guide to Organizing Your Finances

Truth time.

I suck at organizing.


Seriously, if you want something organized then don’t ask me to do it because I will fail. I have no problem admitting this, but I do have a problem with not trying to improve.

When it came to finances I realized that my biggest problem was that they were all over the place. Trying to manage your bank account in your head is never a good way to improve your financial situation.

Organizing your finances gives you a new sense of control over your life. It’s a terrible feeling to wake up and realize you have a bill due today and you don’t have money for it because you splurged a bit too much the previous week.

Life is great with surprises, but only when they are fun surprises like a party. A surprise eviction or repo man visit is never enjoyable.

In this post, we will go over the different steps required to get your finances in order.

1. Write Down Your Assets and Liabilities

This step will help you get a general overview of everything.

  • Assets: List all of your bank accounts (checking, savings, etc), retirement accounts (IRA, 401k, etc), equity in your home(s) if you own any, vehicles, and stocks/bonds/annuities.
  • Liabilities: This is the not so fun one. List all of your debts including your mortgage, student loans, car loans, other loans, credit cards, and any other debt.

You can do this on a simple piece of paper, but because I like to keep track of everything no matter where I’m at I do this in Google Sheets. That way if I need to check on it I can do so on my computer, phone, or tablet.

2. Calculate Your Net Worth

This one is pretty simple. Take all of the assets you wrote down and subtract the total debt from them.

Assets – Debt = Net Worth.

It’s quite possible you will have a negative net worth, but don’t fret because a lot of people are in the same boat. You are going to work your way out of it.

If you’re tracking everything in a spreadsheet then you can have this done automatically for you. I know it’s fun doing old school math, but I prefer to let the machines do the work for me.

3. Record Your Income and Expenses

If steps 1 and 2 gave you a 10,000ft view of your finance, this step brings you down to ground level. This is the nitty gritty stuff that affects you daily.

In this step, you are going to calculate your monthly cash flow.

  • Income: List all of the income that you receive. Your salary, additional income from babysitting or stock/bonds, and money from sales.
  • Expenses: There are two common approaches to this. The first one is looking back at the last 3 months of spending and average out the monthly total. Another way is to go back over the past 12 months and average out the monthly total. Of course, things get hairy if you went on a big vacation or made a large purchase. To better understand your expenses take a look at 10 Steps to Starting a Budget.

If you noticed, this is the beginnings of building a budget. A budget only works if you understand both your income and expenses so you can make wise purchasing decisions in the future.

These things can either be done on a piece of paper or a spreadsheet. I track both of these items in the same spreadsheet that tracks my assets and debts.

4. Calculate Your Cash Flow

You probably already know how this is done. Simply take your expenses and subtract them from your income. The final result is your monthly cash flow.

5. Get Your Credit Score and Credit Report

So far we have an understanding of our net worth and monthly cash flow. That’s an excellent start, but we aren’t finished yet.

If you only want to check your score annually from all three credit reporting agencies then just go to Annual Credit Report.

6. Step Back and Evaluate

You’ve collected all of the necessary information so that puts you in a very good place. You can’t improve your financial situation until you understand your financial situation.

Net Worth

If you have more assets than liabilities then you have a positive net worth. If your net worth is lower than you want it to be then you need to set a goal to increase it. There are a number of ways to do this outside of your job.

Understanding your net worth is the first step to changing it. It’s also important to understand the difference between your net worth and your income.

Cash Flow

Hopefully this goes without saying but your cash flow should be a positive number. A negative cash flow needs to be corrected as soon as possible either by increasing your income or decreasing our expenses (or both).

One thing that gets people tripped up on cash flow is credit card use. For example, if your monthly expenses are $2,000, but your income is only $1,800 then you might find yourself using your credit card to make up the difference.

This, of course, doesn’t put your cash flow in the positives because you are living beyond your means.

Understanding your cash flow situation is very important because it will help you understand the type of life you can afford to live currently. Once you understand it you can make the proper adjustments and create a plan to help you achieve your financial dreams.


Another important aspect of your cash flow is looking at your savings. If you’re reading this post there is a good chance you don’t have anything in savings or you have very little. Having an emergency fund built up is very important because things happen in life that you just can’t account for.

The general rule of thumb is that you should have a minimum of 3 months of living expenses saved up. Ideally you’ll have 8+ months because if you lose your job you never know when another one will take its place.

Credit Report

Pour through each of your credit reports so you have an understanding of what kinds of things are being reported and also look for any errors. Things are being misreported all the time so it’s important that you stay on stop of them.

If you do find an error then you need to get it corrected. To do this, simply contact the reporting credit bureau and let them know you want to file a dispute. They are must investigate every dispute within 30 days of your request.

If you have negative entries on your credit report they will remain there for 7 years. After 7 years they should automatically be removed. If you find some negative entries older than 7 years on your report you need to request to have them removed.

7. Create Monthly and Yearly Budgets

You’ve put your financial life under a microscope. You might need some time to pick your jaw up off the floor. I know I needed to when I found out I wasn’t as financially secure as I thought I was.

In fact, I was going backwards and I wouldn’t have known if I didn’t take the time to analyze things.

With everything in place it’s time to work on your budget. A budget will act as the framework for your finances and be the path to follow to secure whatever future you decide.

8. Rinse and Repeat

This isn’t a one and done exercise. Set a schedule where you will go through this process again. Some people might need to do it monthly while others could do it quarterly. The important thing is that you do it.

Keeping your finances organized allows you to spend more time enjoying life and less time stressing about being able to cover drinks for your crazy Aunt when she comes into town.