June 6, 2016

5 Steps to Get Yourself Financially Organized

Want to get your own financial house in order? Here’s how to get organized  and stay organized once and for all
Paul Shapero, Director of Family Office Services

You know that feeling you get when you clean out a messy garage or organize a cluttered closet? That feeling of knowing where everything is and that everything is in it’s place?

If a clean closet can make you feel like you’ve got it together, just imagine how being financially organized will feel—somewhere between a sense of deep relief and having super powers!

Every super hero knows that they have to address the nemesis head-on, so put on your cape and let’s get started.

1.     Tackle the paper monster

The first step in getting organized financially is to understand exactly what you own, what you owe or what you have that has an affect on your finances. Start by collecting statements for the easy stuff like bank, investment and retirement accounts. Do you have any other sources of income, like Social Security, annuities, rental income or repayment of loans? Remember to collect and record all these income sources as well.

Next, make sure to include all the credit cards you have—even the ones that you no longer use but are still open. Even if you don’t have an outstanding balance, it’s important to know how much credit capacity that you have. Don’t forget any outstanding loans like mortgages, lines of credit or leases.

Review your insurance policies and understand what they cover and what deductibles you will have to shell out should you need to make a claim. Uncle Sam requires that you keep three years of tax returns and any supporting documentation for any deductions you claimed, so make sure to include them. Finally, collect all of your estate planning documents, like wills or trusts. Before you put these away, take the time to read them especially if you haven’t done this in awhile to make sure that they are still relevant.

Now that you have collected this information, how should you store it? If you work with a financial advisor, most of them offer personal online vaults to store all of your important financial documents. You can also scan and include these in your Quicken or Quickbooks file. There are other digital online vaults that you can use, but you need to review these carefully for privacy and identity protection.

If you are not the type of person to scan and keep all of this information electronically, then a simple file cabinet and folders will do the job just as well. Just make sure that you can lock it and that you have a backup copy in an offsite location like a safe deposit box or fire proof safe in your home.

2.     Consolidate and conquer

Trying to manage too many similar accounts, like checking, savings or even investment accounts can be overwhelming. I recommend that you keep your checking accounts to two, one for bill paying and one for personal spending.  Keep savings accounts to one or two depending on what these are to be used for.  Ask yourself why you have these accounts and what purpose they serve.  If you can’t come up with a really good answer, then I suggest you consolidate those accounts and close the ones you no longer use.

3.     Tame the George Costanza wallet beast

With all of the credit and reward cards offered by just about every retail store these days, it’s no wonder that we walk around with wallets that resemble baseballs. To avoid the George Costanza wallet condition, apply the same weeding out method to your credit cards. While I believe that everyone should have a least two credit cards, no one needs to have ten different cards.  Just because a store offers you 10% off if you sign up for their card, it may not be a bargain in the long run.  How much is the annual fee for each card?  What interest rate will they charge you if you don’t pay it off?  The 10% you saved may cost you much more when these fees hit your account.  Take a few minutes to understand the details of each card, what benefits they offer and if you really make use of them.

4.     Use your automation weapon

Forgetting to pay a bill not only incurs interest and late fees, but it can also affect your credit score. Avoid missing payments or underestimating your cash requirements by making a list of what bills need to paid monthly, quarterly and annually so nothing slips through the cracks.  I also recommend that you pay your bills electronically. It’s also a good idea to have recurring bills like your credit cards, mortgage and insurance paid automatically from your checking account.

5.     If you’re losing the battle, call for reinforcements

Keep in mind that every super hero has a trusted sidekick. If reading this article is making you break out into a cold sweat or giving you a headache, then ask your financial advisor for help. They have financial super powers and actually like to do this stuff.  With their help, you will conquer the financial organization beast once and for all.

 

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Paul Shapero, Director of Family Office Services

Acting as a personal accountant, Paul manages the day-to-day financial responsibilities for our clients so they don't have to. His expertise in accounting and natural ability to anticipate future possibilities creates positive options and outcomes for clients.