By: Stuart Simpson
Could you locate one of your important financial documents at a moments notice? Do you know details about your current financial status? (Besides “I’m broke!) Have you made long term plans concerning your finances? If you’re like most people, and answered no to these questions, you need to do some financial organizing. Making sure you have some type of filing system, figuring out a budget, keeping insurance up to date, and establishing a will are all important steps to becoming organized.
First, you should set up some way to organize all of your financial documents. There are programs and websites that can be helpful in getting you started. An excel spreadsheet is an easy way that you may already have on your computer. You also need a filing system for paper documents that you need to keep. Some things will need to be kept forever, such as, birth certificates, divorce papers, life insurance policies, military records, and social security cards. Other things need to be kept for 6 years such as, bank statements and cancelled checks, investment records, and tax returns. Everything else needs to be kept until it is updated and then old versions can be discarded. Always make sure to dispose of financial papers properly by shredding or burning them.
Once your documents are filed and organized, it’s important to get a budget down on paper. Make sure to list all of the income you have in bank accounts, all property owned, stocks, bonds, cars, and jewelry as your assets. Then list all liabilities that you currently owe on, for example, your house, car, credit cards, life insurance, loans, etc.. Subtracting liabilities from assets will give you your net worth. Next you will need to look at your monthly income and expenses to see if you are making more or less than your spending. If not, find some ways to cut corners and save more. If you are bring home more than you’re spending, think about putting some of the extra cash into your retirement fund.
Making sure all of your insurance policies are up to date is another important aspect of financial organization. Keeping health insurance and disability insurance current is important in the event of an illness or accident that might leave you out of work for a while. A health impairment of any kind that interferes with your work can be financially devastating, especially if your finances are in a disorganized state. Also, if anyone depends on you financially, you should have life insurance at an amount that would be beneficial to your family to continue on at their current status in the event of your death. Having insurance can make the difference in your financial security because you never know what could happen tomorrow. Insurance makes sure your needs would be met.
Finally, when all of your finances are organized, budget is set and insurance is updated, it’s important to set up a will. If something were to happen to you or you and your spouse, you would want your children taken care of and your financial wishes carried out. A will is a legally enforceable declaration that will do exactly that. An attorney would be a good advisor because will can be complex and laws are different in each state. Once established, a will can be changed or revoked by you at any time. So keep it updated with your present wishes.
Take steps today to set up a filing system, create a budget, update insurances, and establish a will. Taking care of all of these things will help you become organized and free your mind and home of all your financial clutter.