Why it is important: You need to get organized today for two people:
For yourself. This is the foundation of all of your future financial decisions. To improve your financial outlook, you need to get ultra clear on 3 things:
- The current state of your finances (Organize)
- Where you are trying to go (Goals)
- Action steps to bridge the gap (Plan)
It is impossible to make informed financial choices without first getting organized. You deserve the peace of mind that comes with knowing you are taking the necessary steps to achieve your financial goals.
For your loved ones. It’s not fun to talk about. If something happens to you tomorrow – where does that leave your family? Will they be able to pull all of the pieces together if you’re gone? During my career I’ve seen countless situations where someone’s own procrastination became the burden of their surviving spouse or children. The degree of difficulty is increased because they don’t necessarily know where everything is located, how your accounts are titled, or who the beneficiaries are. You owe it not only to yourself, but to your loved ones to get organized and take control of your own financial future.
Why we put it off: You already know getting your financial life in order is important.
So why do so many of us put it off? For many, simply inertia can be tough to overcome. What makes matters worse is our fear of the potential for “bad news”. This makes us put off this task even longer, which only amplifies the problem. The longer we wait, the more disorganized we become.
Oftentimes, it’s the people that need to see a doctor the most that put it off the longest. We are all afraid of what we don’t want to hear. We also know that visiting a doctor should be a priority so we can live happy and healthy lives. Fear can be a powerful driving factor in not only our healthcare decisions, but our financial decisions as well.
Don’t be too hard on yourself when getting started. And if you need help, that is okay too. Financial professionals are used to seeing all types of different situations and are there to help – not judge.
Perhaps all of this is best said by an old Chinese proverb: “The best time to plant a tree was 20 years ago. The second best time is now.” Let’s get this one checked off your list.
The final hurdle that many face is not knowing where to start. I’ve found most people prefer to manage their finances in 2 different ways – “Do it myself” or “Step-by-step guidance”. I have provided a walkthrough of how to organize your finances for each depending on your preference.
Do it myself: Ask yourself the question: “If I were to get in an accident tomorrow, what information would my loved ones need?” Anything on that list is something to include in your financial plan. Getting organized will help you make informed financial choices, and your loved ones will have access to information when they need it most. To help you get started, I’ve compiled the table below with the information you need to gather and where to find it to get organized.
|Financial Data to Organize||Best Source*|
|Income & Tax Information||Any of these sources will give you an accurate representation of your income:
|Social Security Retirement Benefits||
|Employer Benefits||Benefits to locate and save are:
From Intranet – best to use for most detailed summary
Not on intranet – less detail but may be used for limited information
Detailed Mayo Clinic benefit information can be found at:
|Employer Sponsored Retirement Plan||Any of these methods will give you a view of your 403(b) or employer sponsored plan
|Investment Accounts||Any of these methods will give you a view of your other investment accounts
|Student Loans||For federal student loans:
For private student loans:
|Debt||Consider mortgage, car loans, other debt, and credit cards you carry a balance on.
*This list tailored for Mayo Clinic employees. If you have another employer, the information to gather will be the same, but you will need to locate your company specific pension, employer benefits, and employer sponsored retirement plan.
Key topics that you will want to make sure your financial plan covers are:
1. Bank balances
2. Investment accounts
3. Loan balances & interest rates
5. Estate plan
6. Life & disability insurance
7. Financial goals
8. Retirement income
9. Tax strategy
10. Investment strategy
Depending on how handy you are with a spreadsheet you can begin to construct your net worth and budget in Excel. You can also aggregate your account information in one place such as Mint or You Need a Budget, but will need another document to keep track of the other information in your financial plan. Wherever you keep this information, make sure security is a priority so nobody has access to it unless a triggering event occurs such as disability or death.
Step-by-step guidance: If you are looking for an easier way to find all of this information and consolidate into one document, this is the section for you. To get started today:
- Enter your financial info below
2. I will provide you an organized financial summary with all of the information listed
It is that simple. This is my way of saying thank you and helping my readers overcome barriers to financial success.
Implementation: Your job isn’t done once your organize your finances. You will need to take action on problem areas and update your plan regularly.
You will want to update your financial plan document at least semi-annually to ensure you are staying on track and adjusting for any necessary changes. Some tasks may require attention more frequently, such as budgeting (monthly) or investments (quarterly). Some areas may not need to be updated for several years, such as your estate plan. Create a schedule and set reminders on your calendar for each task. Don’t let the status quo become your financial strategy.
For those that don’t have the time, desire, or expertise to manage this on their own, it may make sense to hire a professional to help you get organized and stay on track. As always, if you choose to hire a financial professional, I recommend first reading What to Look for in a Financial Advisor to ensure whoever you hire, you can feel comfortable that they have your best interest at heart.
I use MoneyGuidePro for organizing the financial plan and aggregating account balances in one place. The cost of professional software alone is about $150/month but is included for all of my clients. To get your complimentary financial summary, complete my step-by-step guide to get started.
I also create a summary with clear action steps for implementation and recommend you have something similar. Without this, it can be easy to miss some topics or let crucial areas of your plan go too long between updates. You can see a sample financial plan summary here: Financial Plan Summary Example.