Spring clean your finances
<!–title: 8 steps to get financially organized
blurb: Need to get your financial life in order? Try these steps to tackle the task this year.
Intro paragraph: How clean is your financial house? It seems every year we say we’re going to get it organized, but this resolution often falls by the wayside once the new year gets underway. The result? Many people are left scrambling at tax time or find themselves missing key information when an emergency strikes.–>
Do your finances need some tidying up? Between Fraud Month in March, tax season and spring cleaning, now is as good as time as any to get your financial house in order. With the roller coaster ride the economy has put us through, most people have set a budget, reviewed their investments and retirement plans and built an emergency fund.
But what happens if all the physical “stuff” of your finances is missing or destroyed (such as in a robbery or fire), or the household money manager is ill or injured? What if the Canada Revenue Agency decides to audit?
It may sound like common sense, but taking the time to get organized can help you keep a better eye on your finances now — and help you get back on your feet faster if disaster hits. Here’s how to get started.
Find a filing system that works for you
You’ve got a budget, you track your bills and expenses, but there’s no use pretending that box stuffed with papers and receipts is an effective organizational system. When you need certain information, chances are you’ll need to find it fast — whether it’s a receipt for a broken item or an insurance policy. If you don’t already have one, it’s time to find a filing system that works for you to house all those essential pieces of paper like:
– Bank statements
– Investment statements and retirement accounts
– Insurance policies and benefits packages
– Receipts and warranties
– Tax information
– Pay stubs
– Property titles
– Proof of maintenance (for your car or home)
– Contracts or agreements
Your system could comprise colour-coded folders, files in a banker’s box or a dedicated section in the filing cabinet. (Or there are many specialty products on the market too.) You may even want to try a binder system to document the progress of one specific area — like keeping photographs and receipts of any home upgrades. Remember, it doesn’t have to be complicated — clear labels and categories are the key.
Summarize accounts and obligations
Not only should we be tracking our income, spending and savings, but experts recommend creating a summary of where your money is and where it’s going. These lists can help you keep a closer eye on your finances, but they can also be crucial if someone has to step in.
For instance, create a table or spreadsheet that lists all of your bank accounts and investments in one place. What accounts do you have with which institutions, and what are they used for? Which investments do you hold and under what terms? Make it clear — both to yourself and to someone else — how to access cash quickly, and what resources can be tapped in a crisis.
Ditto for your obligations — like credit cards, loans, bills and automatic savings plans. Are bills paid online or by mail, and when are they usually due? What debts are outstanding, and are they covered by any insurance policies? Are RRSP contributions automatically deducted by your employer, or is there an automatic transfer between your accounts? Do you know which creditors you need to contact if you cancel a debit or credit card?
If you’re helping to manage someone else’s money (like paying a parent’s bills), make sure to list that information as well.
These summaries can contain a lot of personal information, especially if you opt to include details like account numbers, so exercise caution and discretion in where and how you store the information. Storing the summary in a safety deposit box is a good idea — but emailing yourself the file can be risky.
Do you know whom to contact in an emergency, or if you simply have a question? In addition to family, friends and medical professionals, your contact list should include people who are involved with your finances, such as:
– Bank representatives
– Your insurance and benefits providers
– Your lawyer
– Accountant or the person who prepares your tax return
– Financial advisor(s)
– Pension fund company
– Any people you work with on behalf of dependents
In addition, jot down any numbers you would need to call to report a lost or stolen credit or debit card. If you lose the cards, the information can still be found online but having it handy can save a lot of time and frustration.
Record the contents of your wallet
What if your wallet or purse is stolen? A list of the cards and I.D. you usually carry — as well as a photocopy of the items themselves — can help you replace them in a hurry. You’ll know which credit and debit cards to cancel, and you’ll have an inventory of items (like I.D. and insurance policies). Some forms of I.D. require more than just a replacement: you may have to contact the police and credit bureaus (like Equifax) as well.
Don’t forget the seemingly insignificant items like membership or rewards cards. After a theft, you might not know what you’re missing, and the terms and conditions may require you to report a lost or stolen card as soon as possible.
Complete a home inventory
You see the contents of your home everyday, but do you really know them well enough to replace them after a theft or fire? Furthermore, could you provide proof to your insurance company?
Complete home inventories are important, but can be time-consuming. Many people document large, expensive and high-end items while everyday essentials like clothing and cookware tend to get overlooked. An accurate list can not only help you with insurance claims, it can help you rebuild your life.
Where to start? Many insurance companies have worksheets, guides and checklists available through their websites to outline the process — such as what to include in item descriptions. (For an example, see State Farm’s Protect your property with a home inventory.)
If the process seems a little daunting, a good place to start is with the visuals. Get out the camera or camcorder and go through your home room by room, including storage areas and the garage. Start with a wide-angle shot of the room to provide some context, then get down to details — like showing the contents of closets and drawers, and getting close-ups of serial numbers or manufacturer’s information. Experts advise to carefully date and label your recordings and store them in a safe deposit box.
Update your will
It’s not easy to talk about death, but it’s important for your loved ones to know what will happen and what needs to be done. If you haven’t looked at your will recently, it’s likely time for an update. Perhaps there are new family members to add (like grandkids), you’ve entered retirement or your children are now adults.
Take the time to talk to your loved ones about your wishes. It will provide peace of mind, and can help prevent damaging rifts that can form between family members. (For more advice, see The family feud and Legacy planning.)
In addition, make sure to name beneficiaries for all of your accounts and insurance policies, especially if you don’t have a spouse. Tax-free savings accounts now have this option.
Back it up
Everything is on your computer or in your filing system, but information experts know having your data and documents all in one location can spell disaster. There are a few options for handling an “off-site back-up” of your important documents and summary sheets — but some are safer than others.
A safe deposit box is still a good place for hard copies of important documents or originals, photographs and any other sensitive information you need to store. At home, a fire- and water-proof safe can help protect documents.
What about digital data like spreadsheets and electronic statements? There are online back-up services available, but there are still concerns about their security and stability, and you won’t be able to access them during a network outage. Storing data on a physical medium like a CD, USB thumb drive or external hard drive and is still a safer bet — and will easily fit in your safe deposit box. (See Your data back-up plan for more ideas.)
Schedule time for maintenance
Finally, once you’ve got a system in place, start setting aside time to keep it in top shape. Some tasks may be weekly (like filing that week’s receipts and paying bills), while some tasks may need attention each month, season or once a year. Block off time in your appointment book, and mark reminders on your calendar.
Getting organized financially is going to take some effort — but it is work best tackled before trouble hits. Start by taking a step or two to get the momentum going, and don’t forget to reward yourself for the hard work!
Additional source: TheTodayShow.com