How to Self-organize Your Personal Finances

Learn how to self-organize your personal finances by tracking spending, creating a plan, paying yourself first, and investing.

Personal finances

I have been waiting a lot of years to feel qualified for a post about personal finances. My theme for 2021 is financial education and I wanted to share with you my philosophy on the subject, supplemented with a few book suggestions.

There is a lot of misunderstanding around this topic and in this article I am tackling a few of these misconceptions. The most burning question is usually: “Where do I start? My financial situation is a mess…” And I think I found the best book to remedy this feeling. Once you start there is a lot to learn and a lot of strides to make, but as in everything else:

A journey of a thousand mile starts with a single step.

Laozi (or Confucious).

Time to read

Time to read: 13 minutes (based on 150 words per minute).


Have you ever made a New Years resolution that you will be saving more in the next year? This is usually in the top ten of the most common resolutions every year. And, obviously, among the top ten failed ones. I have already covered resolutions and the reason why I don’t believe in them here and the reasons why I prefer yearly reviews here, so I won’t repeat myself. My point is that, like everything else, you need to create a system around anything that you serious about. You take goals, you form habits around them, and from time to time you review your habits and make decisions about them (drop, change, or keep).

This article is about creating a system for your personal finances. Like everything else you need to have a goal in mind and you need to track it. And once you define your system and it starts working, then you just feed resources into it (i.e., money) and monitor from time to time.

My biggest influence on my evolving view is I Will Tech You to Be Rich by Ramit Sethi (link to Goodreads). I also thought that the title sounds like a scam, but I have seen so many references to this book and it was recommended to me so many times. When I finally started reading it I found that I know most of the stuff in it.


So what is the problem? Why not everybody has a personal finance system? The main problem in my opinion is that nobody teaches us how to handle money. The first author who opened my eyes on this subject was Robert Kiyosaki in his Rich Dad, Poor Dad (link to Good reads). In reality, most of our dads have been poor dads. Not so much in terms of financial situation, but more about being financially wise. Most people leave form paycheck to paycheck, trading their time for things that they don’t need so that they can impress people they don’t like. When you realize this, this is going to change your outlook on things.

Money is just a means to exchange trust. You have a mutual understanding with your employer that you will work in exchange for money. Because you know that you can subsequently trade the money you have for things (e.g., food, clothes, technology, home). And also while you usually work for money, you can create a system that makes money work for you.

The benefit of this chapter is a sequence of steps that you can follow to get hold of your spending, pay out your debt, start saving, and start investing your savings so that they work for you. Sounds like a dream right? A dream only suitable for the rich? Well, there is this beautiful thing called compound interest which allows you to become rich as long as you start early.

How can you organize your personal finances?

There is only one more book that I want to refer here: The Richest Man in Babylon (link to Goodreads). And the simplest perspective that will change your world view about money and getting rich.

Do not save what is left after spending, but spend what is left after saving.

Warren Buffet

Paying yourself first means saving money before you start spending them. It takes some work to get there and some discipline to keep doing it, but this is the essence. Along with investing what you save and not keeping it lying around.

Step 1: Get out of debt

The biggest obstacle for self-organizing your personal finances (a.k.a. accumulating wealth) is your debt. In case you don’t know, your credit card company charges a huge percentage if you don’t pay your bills regularly. So rule #1 is Pay off your credit card on time. If you are already in a bad situation, create a plan for paying off your credit debt, share it with your credit card company and ask them to lower your APR (annual percentage rate). If you have multiple credit cards, keep only a few (1-3) and close the rest (after you pay them off of course).

Step 2: Track your spending

You have two types of spending: fixed and variable. On your way to self-organizing your personal finances, the most important step is self-organizing your spending. Your fixed spending is rent/mortgage, utilities, cell phone, student loans, and food. There are probably different notions for fixed spending for different people and even though you may think that 100% of your spending is fixed this is rarely the case.

Get s spreadsheet, or a sheet of paper, or any other tool and track your spending for two to three months. Ideally, you need to this for a full year to get a better understanding, but I would recommend to start making changes after a couple of months. Break down your spending into categories – living expenses (rent/mortgage, utilities), groceries, home improvement, entertainment, etc. And calculate the percentage that each category constitutes.

The reason I suggest having less credit cards is that you can do the spending exercise easier. I would recommend booking all (or most) of your expenses on the same credit card. And use your monthly statements to track your spending.

Step 3: Create a personal finance plan

The next step is to get real and plan. I won’t call it a budget because there is a lot of negative response to this term, but this is a budget. I am borrowing heavily from Ramit Sethi here and the 60/40 rule that he describes in his book. The input into your plan is your income – let’s assume $100 for simplicity. Pay yourself first means setting aside 10% (or more, this is your plan) as savings. No matter what you need to learn to live on 90% of your income. Period.

You are left with $90. If you have a credit card debt which is substantial, I would set aside another 10% to pay off your debt. So in case you lived lavishly (compared to your income), you need to learn to live on 80%. If you don’t have to pay off credit card debt, you can put these 10% into a long-term savings account (more about this later).

Now you are done to $80 while you used to easily spend $100 a month. Your fixed costs should be around 60% of your income. If you are above review them again and cut down. Put $10 into your short-term savings or your emergency fund. You need to have a fund where you can tap into if you need. And finally designate the final 10$ as fun money. You can do whatever you want.

In summary, 60% of your income goes to your fixed costs, you save about 30% in different funds, and you have 10% to spend for fun.

Step 4: Invest your savings

Full disclaimer here, I am not a professional financial advisor. I had one for a while and I was not really convinced in the value that he brought on the table. So everything below is based on my own experience. Use at your own risk.

Research and take full advantage of the different tax sheltered opportunities. In US they call them 401(k) and Roth IRA. In Canada, we call them TFSA and RRSP (and others). Try to max out your contribution room as much as possible.

As for what to do within the account I would recommend learning more about stock options, bonds, and mutual funds. Nothing can substitute your own knowledge. If you are feeling lazy, try to find an index fund and invest in it. Index funds in a nutshell are portfolios of securities that automatically follow the market. This usually means an average return which beats inflation, but over a long period of time.

Step 5: Optimize your spending

Here we will look at the 60% of fixed costs that you are paying. The goal of this step is to maximize the cost stuff that you love and minimize the stuff that you don’t. For example, you can try and negotiate better fees for your bank accounts and credit cards. You can fully use the perks of your credit cards (e.g., cash-back or points). Review how much you are paying for your car. Do you need such kind of car? Can you downgrade? Or do you want to upgrade? Do everything you can to shift cost from the less enjoyable to the more enjoyable activities.

Step 6: Automate your personal finances

Most banks offer a lot of functionality to automate your personal finances. For example, you can automate the withdrawals to your retirement savings. One less thing to worry about. You can also automate the withdrawals to your long-term and short-term savings. Setup your investment accounts to automatically reinvest the dividends into the same securities.

The value of this step it to put yourself out of the equation. You might feel lazy, or slack over time. But if you have a system in place you can forget about it. It will work regardless of your mood.

Step 7: Establish your saving goals

In this article I do not advocate for saving money for the sake of savings money. This is the most pleasant step of all. Think about and establish your saving goals. For example, you can save about your dream car, or about your dream house, or a luxurious vacation. Having goals is important, otherwise you will not achieve anything. You will satisfy these goals from your long-term investments (but not from the retirement investments). If you have been diligent or if you have automated the system, eventually you will get to a point where you will be able to tap into the account and fund whatever you want to fund.

Be careful with several implications. You will be withdrawing from a non-tax-sheltered account, which means there will be tax implications. But also research and read about your dream spending. Most people believe that real-estate is the best investment and this is not always the case. Moving into your dream house into a dream neighborhood usually means an increase in fixed costs. Can you afford them?

Step 8: Put more fuel in the system

Once you have the system in place, hopefully it is clear how you can improve it. The more money you put in it (income) the more savings you set aside and the more wealthy you accumulate. How can you put more money? Get better at your job. Learn a new skill. Improve your efficiency. Once you have done that, ask for a raise, but be careful. You need a certain career capital before you can ask for a raise. Or try getting a better job. And even try to find a side gig. For example doing a thing that you love and you get paid for can gradually turn into a second profession and maybe even into your main profession.

Personal finances
Eight steps to self-organize your personal finances


Self-organizing your personal finances is simple but not easy. You need to get your spending under control, you need to create a plan for your spending, you need to pay yourself first. And, of course, you need to invest your savings so that they work for you while you are busy with other stuff.

Next steps

What are the next steps?

If you have liked my article, please proceed to my contact page, where you can view various ways to contact me.


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