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Getting Your Finances Organized

Money-related topics frequently top of New Year's resolutions lists, and even more so in this time of economic turmoil, says Early Show financial guru Ray Martin. But, he says in this column, before you can try to achieve those goals, you have to organize your finances. So, Martin explains how to do that, then outlines moves to help you with your financial priorities. He gives step-by-step pointers on conquering that pile of bills and financial statements on your kitchen counter, on getting your credit card accounts under control, and on identifying and consolidating your various investment and retirement accounts.

As the economy sours and job losses mount, more folks are including financial goals in their New Year's resolutions. Top financial resolutions include sticking to a budget, paying off debt and saving more money.

But before you can expect to make real and lasting progress on your financial goals for the new year, you need to organize and prioritize your financial life.

How do you know your finances need to be better organized?

Well, for starters, see how you answer a few of these questions:

  • Have you recently paid a bill late because you misplaced it?
  • Do you have a recent copy of your credit report?
  • Do you know your credit score?
  • Do you have a list of all accounts, numbers, online IDs and passwords?
  • Do you have a list of all retirement accounts and life insurance policies, including beneficiaries?
  • Do you have wills, living wills and durable power of attorney documents?
  • Do you have a specific financial plan for paying down your debt and building your savings, with specific dollar amounts, goals and dates?

    If you don't have a good answer to most of these questions, then, like many folks, you could benefit from a plan to better prioritize and organize your financial life.

    Another reason people give for their financial goals falling off the tracks is that they're not organized.

    Here are a few tips to help better organize your financial life.

    Organize Counter Clutter

    Those piles of papers, bills and statements cluttering the kitchen counter have to go. Replace them with a filing system organized by account and category that includes folders for bills, tax documents, statements and personal mail. Then put the filing system to use by filing your bills and statements as these come in, rather than letting them pile up on the counter or desk. The important thing is to use a system that works for you and that you will use.

    Close out your checkbook register at year-end and start a new one. File the register from last year with the tax statements you will need for your tax return. Use a multi-file box for your tax return and related statements. These come preset for this purpose.

    Keep insurance policies, wills/trusts, birth/marriage certificates, passports and other hard-to-replace documents in a fireproof safe box. Also, keep a backup copy of the financial records on your computer. You can get a fireproof box from many department stores, Wal-Mart, Home Depot, Lowes, etc. for about $30 to $100, depending on the size. Keep this in a safe place in your home.

    Use a safe deposit box at your bank to store only valuable and irreplaceable documents and items. There are certain items that should not be stored here, your will being one of them. That's because at your death, the bank will seal off access to a safe deposit box until the court approves an order appointing a representative to oversee the opening.

    Organize Account Clutter

    Do you know where all your money is? If you have multiple accounts with the same titling, it can become difficult to get a complete view of your overall allocation and track your investment performance. For example, say you have several retirement accounts, such as IRAs and a 401(k) account in a prior employer's plan. If this is the case, then consider consolidating these accounts into one rollover IRA. The benefits of doing this is that one account will be easier to monitor and manage. Doing this will also make it easier to keep your beneficiary designations up-to-date.

    Organize Credit Clutter

    Is it really necessary to have all those credit card accounts? Although there may have been a reason in the past for having each account, if that reason is no longer valid, then the account should be closed. Too many accounts that go unmonitored can be prime targets for ID thieves, who can hijack the account information and use it to perpetrate fraud using your information. The way to approach this goal is to get a copy of your credit report that lists all of your accounts. Credit reports from all three credit bureaus can be accessed for free at Then contact the companies of the accounts you want to close and ask them to note "Closed per account holder's request" on your credit report. Be aware that closing credit accounts where there is a long history of on-time payments and a large amount of available but unused credit may have a negative effect on your credit score. But closing recently-opened department store cards, with low limits, should have little or no effect.

    Organize Your Estate

    Most folks do not have the basic estate planning documents, which include a will, living will and durable power of attorney. These documents state what happens to your assets, who will be the guardians of minor children, and who will make health care decisions and manage your finances when you are unable to do so. Steps to accomplish this goal can include purchasing a copy of Quickens Willmaker or Plan Your Estate from These programs and books can walk you through making a will and provisions you need to consider for your situation. Next, create legal will documents using these computer programs. This can be really helpful in raising the issues you need to consider in drawing up a will and helping you decide your options. Once you've done this homework, seek the advice of an attorney who can help you complete the process. How much you'll pay will depend on how simple or complicated your documents are. A simple will and related documents may cost as little as $250 to $500; however, you can easily spend $1,000, or more when trust provisions are involved.
    Also, think about this: If something were to happen to you, would your spouse or family know exactly what financial accounts and documents you have, where they are located, and how to access them? How would they know where to locate the different Websites and passwords you use to access information on theInternet? For this reason, I suggest putting together a personal document list that includes not only the information on your investment and retirement accounts, but also pertinent information on your property (deed to home, title to cars, boats, etc), insurance policies, legal agreements, etc. A personal document list should include the names and phone numbers of guardians, executors, trustees, lawyers, accountants, investment advisors, etc and the location and contents of any safe deposit boxes.

    Meeting Your Goals

    Many individuals set out financial goals but fail to accomplish them. One reason is that, without a plan to track progress, it's easy to get discouraged when you don't see immediate results. Whatever your financial goals for the New Year, if you want to be successful in reaching them, then consider these steps:

    Make a Written Plan

    The saying "plan your work and work your plan" certainly applies to your finances. Any goal that's not written down is not likely to be achieved. The key to attaining your goals is to keep them realistic and write down a specific plan of action. For each goal, write a summary of what you want to do, why you want to do it and when and how you will get it done.

    When you make a written plan, think about the most effective way to accomplish your goal. For example, the key to paying off your debts in the shortest time is to know which debt costs you the most. Make a list of your debts that is sorted by annual interest rate. The debt with the highest interest rate should be paid off first. It is typically best to use any savings you have to pay down this debt first. Why? Typically, your savings is earning less interest than the debt you owe. After the debt is paid off, you can use the money that was paid toward the debt payments to build up your savings again.

    Also, create a plan that allows for several ways to accomplish your goals. For example, the money to pay off debt can come from increasing your income, reducing expenses, selling some stuff, or a combination of all three.

    Finally, the key to a good plan is to Keep It Short & Specific (the KISS principle). Here is an example:

    • Goal: Pay down $5,000 of credit card debt.
    • Why do it: Getting rid of these monthly payments will enable me to increase my cash flow and build my savings.
    • When I will do it: I will pay off this debt in 12 months.
    • Action steps to do it:
    • Stop making any new charges on my credit cards.
    • Use some cash in savings to pay towards this debt now ($2000).
    • Use savings from raising my deductibles on my auto insurance ($150).
    • Apply my tax refund in April ($1,200) to pay off this debt.
    • Pay an additional $135 per month to pay towards this debt. To come up with this extra cash, I will reduce expenses by car pooling, bringing my lunch to work, eating out less and buying less music online.

    Prioritize Goals

    Set out to first accomplish the goals that will provide the most financial benefit and free up resources that can be used to accomplish your other goals. For example, use extra cash savings and income to pay down credit card debt. When the credit card debt is paid off, use the money from credit card payments toward building up an emergency fund or saving for a car or a down payment on a house.

    Break Goals down into Action Steps: Create action steps for each goal, with each step being something that can be accomplished quickly. For example, if you want to get your estate plan in order, the first step is to review and update the beneficiary designations on your retirement accounts and life insurance policies. The next step would be to outline to whom you want your assets distributed and who would be your representatives, executor and guardians in your will. Finally, select and meet with a competent lawyer to help prepare and finalize the documents you need. The message here is to make continuous progress on the steps towards your goals and to seek professional help to keep you from getting bogged down.