Financial Organization for a Young Family

Summary

If you are the financial head of a young family, it may feel like a daunting task to begin saving for a large financial goal (saving for a down payment on a home, buying your next car, etc.). You may feel overwhelmed, asking yourself “How can I possibly begin saving for these goals? I’m not even sure where all my money goes every month.” If this sounds like you, you might be financially disorganized.

 

As both a financial planner and as a financial head of household, I have learned firsthand the value of financial organization. It doesn’t matter whether you’re a high-income earner or not, everyone can benefit from being financially organized. In this article, we’ll take a high-level look at three tips to become financially organized.

 

Tip #1 - Consolidate as much as possible. When my wife and I were first married, we had every intention of consolidating our individual credit cards and checking and savings accounts into joint ones. For one reason or another, we procrastinated getting this done. Because of this, paychecks and bills were coming and going through these various accounts, and we lacked a clear vision of our monthly cash flow.

 

When we finally took steps to close the individual bank accounts and credit cards and open joint ones, the clarity we gained in our monthly cash flow was significant. Whether you’re single and have accounts with several different banks, or newlyweds needing to open a joint checking account, consolidating accounts causes income and expenses to flow through one place, versus multiple, making it far easier to know exactly where each dollar is going.

As a warning, make sure to switch over all automated billing (your rent or mortgage, car insurance, etc.) to your new joint checking account or credit card, to avoid missing any important payments!

 

Tip #2 - Look through recent statements for credit cards and checking accounts. I realize this is not everyone’s idea of a relaxing weekend activity but looking through your recent financial activity can be an eye-opening experience. You might be surprised at just how much you spend and how quickly small budget items can add up over a month. You may find you’re still being billed for subscriptions you forgot about or weren’t aware of at all.

 

You might also find fraudulent activity. When I began this habit of regularly checking my account statements, I found $140 worth of fraudulent charges in my checking account! Because I made the effort to look through the account statement, I was able to catch the fraudulent charge, call my bank, and make them aware of the situation. Within a few minutes, they had canceled my card, refunded the fraudulent charges, and issued me a new debit card. This may not have happened had I not taken the uncomfortable step of looking through my account activity for the previous month.

 

Tip #3 - Look at your most recent paystub. Your paystub is a snapshot of what you earned over the pay period, minus the deductions that come out of your paycheck. Aside from payroll taxes and income tax withholding, these automated deductions can include retirement plan contributions, health insurance premiums, life insurance and a host of other benefits. If you don’t understand something on your paystub, ask your company’s human resources department to explain.

 

Having a clear understanding of what you earn each pay period, and what comes out of each paycheck can provide additional clarity into your financial situation. You may find that you’re saving less for retirement than you thought or that you are not fully utilizing your employer benefits.

 

If you have taken the above steps, you might find it easier to begin planning for that large financial goal you have on the back burner. Now that you have clarity around your monthly finances, you can start to see where a few extra dollars here or there can help you begin saving for your first home, that replacement vehicle, or the trip you want to take next summer!

 

Zac Pohlenz is a Wealth Advisor at Clayton Wealth Partners, a fee-only investment advisory firm in Topeka and Lawrence, Kansas. Zac works with clients from all walks of life, covering all facets of their financial lives. Zac’s areas of expertise include retirement planning for young professionals, employee and employer plan benefits, and estate planning.

It doesn’t matter whether you’re a high-income earner or not, everyone can benefit from being financially organized. Zac Pohlenz