How to organize your finances for the New Year
(MoneyWatch) Most folks include financial goals on their list of resolutions for the New Year. If you want to be successful in reaching those goals, the best advice includes how to prioritize your goals, make a written plan and track your progress.
But what if your finances are so disorganized that you don't know what you have and what you owe? Before you can make progress on your financial goals, you need to organize your finances. And to find out if your finances need an organizational overhaul, answer these questions:
Have you recently paid a bill late because you misplaced it?
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 a recent copy of your credit report?
Do you know your credit score?
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 the answer to most of these questions, then, like many folks, you could benefit from a plan to better prioritize and organize your financial life.
Here are a few simple and effective steps that can help:
Get rid of paper clutter
Those piles of papers, bills and statements cluttering the kitchen counter have to go. Replace it 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.
Close out your checkbook register at year-end and start a new one beginning Jan. 1. File the register from last year with the 2012 tax statements you will need for preparing your 2012 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 back-up copy of the financial records on your computer here. You can get a fireproof box from many department stores, Walmart, Home Depot, Lowe's, etc. for about $30 to $150, 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 banks typically seal off access to a safe deposit box after the death of the owner until the court approves an order appointing a representative to oversee the opening.
