ew year... new financial habits.

The lack of control and financial disorganisation stayed in 2022. In this article, I will share with you my thoughts on how to organise your personal finances step by step. This is something that depends on you and that will allow you more peace of mind and safety, and help you to start, once and for all, saving money to achieve your dreams.

Step 1: figure out your financial reality

It's essential that you understand, with as much detail as possible, how your financial life is and what you usually spend your money on. 

You might even think you know exactly where you spend your money, but usually the moment you put the numbers in front of you is the moment you realise the real amount that corresponds to your monthly expenses.

To be able to do this exercise, you need to analyse your financial behaviour over the last few months. To do so, collect your bank account statements for the last 2-3 months and record in a notebook or an excel sheet ALL the money that you received and spent, and for what: salary, house rent/mortgage payment, water, electricity, gas, internet, telephone, supermarket, petrol, monthly fees, dinners/lunches out, and all other consumptions.

Once you have all the expenses broken down, allocate each one to a more general category (for example, house bills, supermarket, meals out, transport, etc.), add them up, and this way you will get the total monthly amount you spent in the different categories. 

This exercise takes work but pays off, so make sure you book a slot in your week to address this issue.

Step 2: budget for your month

Once you know exactly what your average monthly fixed expenses are and how much your lifestyle is costing you, organise things further by building your own monthly budget.

A monthly budget allows you to spread your income across the different fixed expenses you have, and, against the amount you have left over, to see how much margin you have for your variable expenses and savings. It is an essential tool to understand if you are living beyond or below your means, to define saving goals and to adjust your behaviour and habits. 

So, don't skip this step and read this article I wrote, which explains the step-by-step process to make a monthly budget.

Step 3: organise yourself

Organisation is fundamental in what comes to personal finance, and it is not enough to make a budget.

It is through your spending records that you will be able to see if you are sticking to your budget or if there is extra spending and if you need to adjust your behaviour. Organise your schedule so that, at least once a week, you dedicate a few minutes to recording your expenses, and remember to set aside some time to make your monthly budget at the beginning of each month. This planning allows you to anticipate expenses that will occur, so that there are no surprises.

It is also at the beginning of the month (or when you receive your salary) that you should take the opportunity to pay all your bills and reinforce your savings. Postponing the payment until the last minute will not make it disappear, and taking care of it right away will save you time, avoid that you forget about it and give you peace of mind. 

When making your budget, if you realise that there is room to save some money, create an automatic transfer out of the current account and start building your emergency fund and saving for your dreams. The savings money should be separate from the rest of it. This way, it's money you don't count on, and you don't run the risk of spending it on things you don't need. 

This process of organising personal finances may seem time-consuming and complicated at first because there is so much information, but it is important that you do things at your own pace and in the simplest way for you.

Take more than a day if necessary. The important thing is that you find the method that is easiest for you and that you automate it to the maximum, so that you need less and less time to organise and control your finances.

If you create a monthly budget and keep track of expenses, you will manage with little effort to finally keep your finances organised and make 2023 a financially beneficial year for you.  

This is something that only depends on you and your will to start taking control of this very important aspect of your life.

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