When you’re working on a big project at work, having all of the data and all the documents that you need in one place makes your job a lot easier, leaves you less stressed than if you had to search for everything and get data from multiple different sources, and helps you to get the job done on time with accuracy. When you’re at home cooking dinner for your family, knowing where all of the utensils, dishes, and ingredients are makes things much easier on you and helps you to get dinner on the table when it needs to be. When you’re doing a project around the house, knowing where your tools are helps you get the job done efficiently without having to waste time searching for them.
Organization makes things easier and helps you to be more efficient.
Many people put off becoming intentional with their money and taking a good look at their finances because they feel like it’s going to be a ton of work. It seems like a huge mountain to climb and something that they don’t have time for. That’s because they haven’t taken the time to organize their personal finances. Yes, it might be a lot of work at first. But things will be much smoother sailing once you put in the up-front work and have a system in place.
Often, people don’t even know what accounts they have, what products they’ve been sold, or what they really need. It usually takes a significant amount of time and follow-up to get a complete and accurate view of a new client’s financial picture because it’s the first time they’ve had to compile their financial lives in one place. Some people have old accounts that they don’t have login information for, they have insurance products that they bought when they graduated college and haven’t looked at since, or they still have money in an account that their parents set up for them when they were a baby.
Taking some time to organize your finances will allow you to establish where you are, set goals for where you want to go, and figure out what actions you need to take along the way to get there. This will also allow you to easily look back and see the progress that you’ve made since all of your financial information will be organized and easily accessible to you.
Here are a couple of steps to take to organize your finances and help you to be more informed about your financial life.
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Figure out where you’re going to store your documents and passwords.
You should have secure usernames and passwords for all of your financial accounts. Even if you don’t login to them, you should still set them up so that someone doesn’t fraudulently open the accounts in your name. There are many different ways to store passwords, but a piece of paper in your wallet or on your computer desk shouldn’t be one of them. Likewise, it probably wouldn’t be too difficult for someone to retrieve the login information that you have written down in the notes app of your phone should you lose it.
I’m not a techie, so I can’t speak to the security of these methods, but a couple of places that you could store your usernames and passwords, which may be more secure than those mentioned above, are in an online vault such as LastPass or Dashlane, or in a password protected Excel sheet.
As for a place to store the financial documents that you may want to keep, you could consider a folder structure in a cloud storage service, on an external hard drive, a flash drive, or somewhere else that you feel confident that your information will be secure.
If something were to happen to you today, would your loved ones be able to access your digital assets? It’s important to have your account and password information stored in a secure place where it can be accessed in a timely manner. This means that someone you trust needs to know how to access the information.
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Gather your login information and important documents.
Now that you know where you’re going to store it, it’s time to start gathering the information that you may want to keep. Not all of the documents listed below are necessary, but may be good to keep on hand. As mentioned above, some of these will allow you to look back and compare to see the progress that you’re making. Others, such as W-2s and end-of-year paystubs, may be good to keep on hand because you could lose access to them if you switch jobs and your payroll account is closed before you think to retrieve them.
Some documents that you may want to keep a hold of include the following:
Income:
- W-2
- End-Of-Year Paystub
- Tax Return
Insurance:
- Life Insurance Policies
- End-of-Year Life Insurance Statement
- Disability Insurance Policies
- End-of-Year Disability Insurance Statement
- Long Term Care Insurance Policy
Estate Planning Documents:
- Last Will
- Living Will
- General Durable Power of Attorney
- Health Care Power of Attorney
- Trust
End-of-Year Account Statements:
- Bank Account
- Employer-Sponsored Retirement Plans (401(k), 403(b), etc.)
- IRAs & Roth IRAs
- Brokerage Accounts
- Health Savings Accounts
- 529 College Savings Plans
- Performance Awards/Restricted Stock Units/Employer Stock Options
End-Of-Year Liability Statements:
- Mortgage
- Auto Loan
- Student Loan
- Credit Cards (If you carry a balance)
Other:
- Budget
- Net Worth Statement
- Employee Benefits Summary
- Business Assets & Liabilities
- Rental Property Information
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Evaluate your financial situation and set goals.
Now that you have everything in place, it’s time to evaluate where your financial life is and where you want it to go. Gathering all of this information is the first step in your financial planning process and is a huge win, once complete.
You’ve got all of the information that you need at your fingertips. Now it’s up to you to do something with it. Start setting goals for where you want to take your financial life in 2019 and define what you need to do to be successful. You should now have all the information that you need to set benchmarks and track your progress along the way
