Best Results Organizing

Your money has different personalities. Some just sit there like your college roommate’s freeloading boyfriend, drinking your milk and putting the empty carton back in the fridge. (Y’know, those investments you were talked into, but which have gone nowhere?) And some are delightful surprises, like friends who show up to drag you to the movies when you’ve had a bad day. (Think of that crisp $20 bill you find in your jeans pocket after doing laundry.) But your money won’t organize itself.

In Part 1 of 16 Ways To Organize Your Money In 2016, we looked at accessing and organizing the information others have about you in your credit report and credit score, and what you can do to improve your finances by tracking and making wise decisions about your expenses.

Today, we’ll look at more tips for keeping your money life in order.

6) Organize Your Financial Information

All the paper and digital information you have regarding your finances represents money going out (bills and statements for fixed necessities and variable luxuries) and money coming in (birthday checks from Grandma, your direct-deposit paycheck, investment interest and dividends). To keep control of your finances, to help you prepare your taxes, and to safeguard your financial future, it’s important for this information to be accurate and accessible.

The financial paperwork we receive or create usually breaks down into these sub-categories:

Outgoing Money

When you get a paper bill, you either tear off the stub to mail it back with your payment and keep the remainder, or you pay online and keep the whole statement/invoice. When I help my clients organize their financial information, we start by breaking the paper piles into categories:

• Monthly or periodic household bills (e.g., rent/mortgage, utilities, insurance, etc.)
• Credit cards statements
• Loans (e.g., home equity, auto, college, personal, etc.)
• Medical bills (which may be ad hoc or part of an ongoing payment plan)
• Anything else being paid on a regular or predictable basis (e.g., piano lessons, tuition, personal chef, professional organizer, fitness trainer) for which you wish to keep careful records

In this case, your basket is your financial information filing system. Usually, I advise this approach:

1. Label (and alphabetize) tabbed interior folders within each sub-category. It doesn’t matter if you use generic terms (cable, power, water) or company-specific (Comcast, CityPower, Valley Water Authority) — just be sure to choose labels that reflect how you think. For credit cards, if you have more than one card from any one issuing company, you may want to put the last four digits of the card number on the label (Discover-1234, Amex-9876), just to help you file quickly. If your system is complicated, you’ll find excuses not to use it. Stay simple.
   Group related sub-categories in hanging files in a filing cabinet, milk-style file crate, or desktop file box.
2. File the backlog in reverse-chronological order.
3. File paper bills as you pay them.

Alternatives to file folders are three-ring binders and accordion folders. However, binders require three-hole punching of papers, and each additional step leads people to procrastinate. Accordion folders can work for college students and those with very few expenses, but a system you can expand as your financial complexity increases will be easier to maintain.

If you get all your bills and statements digitally, there’s no need to print them out; just set up a new behavioral system to acquire the information, label it, and store it.

You can manually download each statement, or use FileThis, an app/service which, once linked to your account, fetches your online statements and bills so you can pay them and store them as you see fit. Let everything live in the FileThis Cloud, on your computer, or in Evernote, Box, Dropbox or Google Drive. (FileThis ranges from free to $5/month, depending on your needs.)

To create a uniform digital system for labeling (for example, bill name and date, like Verizon-2016-1). Some people prefer to keep all of the digital invoices in one online folder and use search to find what they want; others (like Paper Doll) prefer a folder hierarchy system that matches the one described above for paper.

Finally, while some people refute the idea of maintaining bills once they’ve been paid, I suggest it for a couple of reasons. First, many companies only provide access to a limit period of billing, sometimes only a year or six months, making it difficult to source errors or track information. Second, for those who tend to be disorganized with their finances, a tangible (paper) system yields a greater sense of control.

Incoming Money

Incoming revenue information may involve pay stubs from employment, alimony or child support payments received, Social Security income, disability payments, IRA disbursements, personal loan repayments (to you), lottery winnings, and stock dividends (if not part of a dividend reinvestment plan). If you’re regularly getting money from any source, or have gotten a large lump sum for something other than employment, make a folder (or folders) to maintain records until tax time.

Transitional Money

The above categories talk about what you are doing to your money, but others show what your money is doing, with or without you. Bank statements for checking, savings, and trusts represent collections of funds in transition. They may accrue interest or have fees associated with them, so take time each month to make sure these accounts reflect what you think they should.

Brokerage statements contain investment information. Sort these by investment type: retirement, college savings, goal-related (like a vacation fund), first, and further sub-categorize (and alphabetize) by company or specific investment. So, in the Retirement hanging folder, you might have interior folders for your 401(k), an old 403(b) that remains in place, IRAs with Fidelity or Vanguard, and so on. Each account should have its own folder.

Simulated Money

Some of your records represent money that’s not real yet. These files might include quarterly or annual statements reflecting either regular or atypical benefit plans for your job, such as if you’re vested in an employee stock ownership plan. If you’re not particularly active in managing this information, maintaining it in digital form will keep you from getting overwhelmed.

You can also have a folder in this section for gift certificates, gift cards and store credits so you can keep track of the money value owed to you. If you prefer to keep them portable, a Card Cubby is a nice alternative to mixing them into your financial filing.

Keep stock certificates, bearer bonds, or other papers of significant value in your safe deposit box or fire-proof safe.

7) Create Tax Prep Folders (for the tax year just ended and for the one to come)

Depending on your financial situation, one folder per year might suffice; if your financial life is complex, you might want a handful of folders for each year’s incoming tax forms, charitable donation receipts, medical expense annual summaries from your insurance company, etc. Create a safe place for incoming papers to land and you’ll be ahead of the game.

Any day now, you’ll start receiving official-looking forms (1098s to indicate interest income you’ve paid on certain loans, 1099s to show interest, dividends, and other payments to you, W2s from employers, etc.) to help you prepare your taxes for last year. To get an idea of the forms to expect, these tax-related Paper Doll posts will walk you through it:

Taxing Conversations: Organizing the Essentials & a New Tax Tool

Taxing Conversations (Part 2): Organizing Fun With Forms

Taxing Conversations (Part 3): Form-Free Organizing

Securing these documents (plus any items that pop up when you’re following the steps in #6, above) will make tax time run much more smoothly, whether you file on your own or use a preparer.

8) Organize a (Socially) Secure Future

Cleaning up your credit history will organize your past; getting a handle on your expenses, financial paperwork, and taxes will take the wobble out of your financial present. But what about your future? Banking (if you’ll pardon the pun) on Powerball isn’t going to do it.

There are numerous ways for minimizing taxes and maximizing your odds for a financially secure future, and if you don’t have one or more of the alphabet soup of IRAs, 401(k)s or 403(b)s, you should be talking to a financial advisor about how to get started. But whatever your retirement plan, there’s one program in which you’re probably already participating (unless you work for the railroads): Social Security.

Start by signing up for your online Social Security account, as I’ve been pestering you about since Paper Doll Makes a Statement: The Social (Security) Network.

If you haven’t yet signed up yet, go to the my Social Security website and click on Create An Account. Once you create your account, you’ll be able to track your earnings and verify that they’ve been properly reported (by you and/or your employer), and get estimates of your future benefits. If you’re already receiving benefits, accessing your account enables you to obtain a letter with proof of benefits (often needed for legal and financial purposes), change your address and direct deposit payment information, and manage your benefits.

If you have already set up your account, change your password! The Social Security Administration actually makes you do what you’re already supposed to do — update your password every six months. If you haven’t, it’ll prompt you to do so when you log in.

Speaking of Social Security, take your card out of your wallet or purse — you shouldn’t be carrying it around with you.

As we talked about in What’s In Your Wallet (That Shouldn’t Be)?, in the wrong hands, your Social Security card is an invitation to identity theft and financial fraud. Memorize your number for when you have to unexpectedly fill in forms. (Really, it’s like a phone number, just nine digits.) Put the actual card in your VIP (very important paper) file system or in your fireproof safe, and only pull it out when you need it.

Can’t find your Social Security Card? Report it, especially if you think you’ve been the victim of identity theft, and then replace it.

9) Save for More Than Retirement: Cheating the Obstacles to Willpower

I know, I know. Saving isn’t sexy. But a beach vacation is. And not having to go into credit card debt to pay for next year’s Christmas presents is an idea that gets the blood flowing. But saving is difficult. Usually, in order to save money, you have to use up all your reserves of willpower to keep from spending it in the first place.

What’s willpower, really? Psychologists have defined it as the ability to delay gratification, resisting short-term temptations in order to meet long-term goals. But the more you delay gratification, the more worn-down and put-upon you can feel.

So, why not do an end-run around willpower? Automate! No, you don’t need to be a robot; you just need to take the ongoing decision-making (to put money aside) out of the equation. Make the decision once and be done with it.

Remember last time, in step #5, you audited your expenses and figured out what bills you could lower? Let’s say you lowered your monthly entertainment expenses by $18 and your phone/communication bills by $11, and maybe eliminated a few other ongoing items by about $15 a month. On their own, that may seem a pittance, but that’s $44 every month. Set up an automatic transfer from your checking to your savings account for $11 per week.

Of course, even if you haven’t identified ways to pare down your spending, as long as you’re not at risk of falling into the red, having small amounts automatically transferred to savings on a regular basis is a way to improve your savings rate without feeling you’re being denied life’s pleasures.

There are other automated savings options. Bank of America’s Keep the Change Program helps its customers save by rounding up each debit card purchase to the nearest dollar, and sequestering that extra money in savings but allowing you to track the movement of money via online banking. For example:

Prefer a little more tech support? The Digit web service works similarly. Once you link Digit to your checking account, it analyzes your spending patterns, predicts your cash flow, and transfers small but varying amounts of your money to your Digit account in an FDIC-insured bank.

You won’t earn interest, but whenever you want your money, just text Digit, and the money can be transferred back to you, so you could wait until you reach a benchmark amount, like $500, and then transfer that to savings.

Digit sends one text each day to let you know your new checking account balance; it can also text you how much your bank balance has changed over the prior two days, and can list all your debits from the prior day. The more you use it, Digit not only helps you save, but also gain more awareness of your spending habits. Isn’t that organized?!

Still to come in this series: organizing to get out of debt, streamline getting paid, using technology to achieve your financial goals, and more!

Two of the most popular and enduring New Year’s Resolutions are to get organized and to save more and spend less. In honor of 2016, over the next few posts, we’re going to look at 16 ways to organize your finances with small, easy steps you can take today.

1) Pull your credit history.

How? Pulling your credit reports is easy. Just go to AnnualCreditReport.com and click on “Request Yours Now.” You’ll be prompted to answer some questions about things like your prior addresses or current or previous loans. (They really want to make sure it’s you, so think before you click.)

Because you’ll be supplying personal financial information, you want to pull your reports from a secure computer, preferably one on your own network, rather than a public computer. If you’d prefer to avoid the web altogether, you can call toll-free at 1-877-322-8228 to request your report, or download, print, fill out, and mail a paper form.

Why? Your credit report includes information that is used to determine interest rates on loans and mortgages, rates you’re charged for insurance, and even whether or not you can rent an apartment or get hired for a job. The best way you can be certain that creditors have properly reported your financial activities, not misconstrued someone else‘s honest activities as yours, and haven’t let bad dudes secure credit in your name, is to check your credit history.

You are guaranteed one free credit report from each of the three credit reporting agencies (Equifax, Experian and Trans-Union). You could just contact them individually, but the Fair and Accurate Credit Transactions Act (FACTA) of 2003 made it federal law to guarantee your right to access your report, for free, once each year.

Once you’ve convincingly proven that you are who you say you are, go ahead and print (or better yet, save a PDF of) your credit reports. And make a note on your calendar to check again next year.

When? You can choose to pull all three reports simultaneously once per year, or stagger them and pull one report from each agency whenever you like, perhaps every four months. While experts sayl that the staggered approach is more likely to catch an error quickly, most people are not diligent about remembering to pull their reports on a regular basis. If you’ve never pulled your credit history before, I suggest pulling all three reports simultaneously, familiarizing yourself with the formats, and then you can decide what you want to do going forward.

2) Check — and, if necessary, dispute — your credit history.

According to a Federal Trade Commission study, 20% of consumers have errors on at least one of their credit reports, and 5% have errors which could adversely impact them during the lending process.

Just as buying (and even watching) exercise DVD won’t help you achieve your resolutions to lose fat and gain muscle if you don’t actually do the workout, downloading your credit report is an exercise in futility of you don’t actually review it. Go through it page by page, line by line:

• Are there credit cards or financial accounts you never opened? (Note, credit card lenders often buy one another out, especially with store-specific credit lines, so be sure to cross-check account numbers to make sure something unfamiliar isn’t just the product of a buyout.)
• Are there addresses or places of employment that don’t pertain to you? (Minor errors, like misspellings, are worth fixing, but don’t necessarily require disputation. Correct them to prevent confusion in the future, especially when filling out forms where you have to jump through hoops to verify your identity.)
• Does it list liens or judgments against you that have no relation to your actual financial history?
• Is there information that should no longer appear on your history, such as a bankruptcy that is more than 10 years old?

If there are mistakes on your credit report, contact the appropriate credit reporting agency and the lenders in question to dispute the errors.

3) Check your credit score.

Although you’re guaranteed access to your credit reports for free, there’s no such promise for your credit score. You hear a lot about your FICO score, but different lenders access multiple scores to assess the interest rates they will offer you for credit cards, auto loans, and mortgages. You can purchase your individual credit scores from each of the credit reporting agencies, or buy bundled scoring from MyFICO.com.

LendingMemo.com

However, unless you’re getting ready to make a major purchase, you have a variety of free options to gain access to least one of your credit scores, which should give you a ballpark sense of your official creditworthiness. Barclaycard, Citi, Discover, First Bankcard, US Bank and others offer credit scores to customers on their web sites; Discover also provides credit scores on monthly bills. In addition, some banks and credit unions are offering free scores to customers as inducements for their loyalty, and CreditKarma, is a surprisingly non-spammy option for accessing your score.

In Paper For Your Plastic: Organizing a Better FICO Score, I’ve written about how understanding the makeup of the FICO score can help you improve your creditworthiness in the eyes of lenders. Since that post was written, new rules about medical indebtedness guarantee that unpaid medical debt will carry less weight than other types of consumer debt, and any medical debt eventually paid off will be removed from your credit history immediately, even if it had been in arrears.

4) Track your expenses.

With the advent of online banking, automatic transfers, and even mobile payment (like Apple Pay), it seems like nobody writes checks anymore. But that means people have gotten out of the habit of reconciling or balancing their checkbooks. It may seem to make sense — no checks, no checkbooks, but we still have checking accounts, and so whether they are paper or digital, I think we need check registers.

When we all wrote checks, we were forced to pay attention to where our money was going, but with all of those swipe-and-done transactions, we’re far less likely to notice how much money is draining out of our accounts until the money is gone. And with automatic transfers, we tend not to look too closely at the bills that come on a monthly basis, so we may not notice errors (fraudulent or otherwise) until it’s well past the date they might be reversed.

At the very least, set an alarm or alert on your computer, phone or tablet to remind you to check your bank account and credit card statements monthly, before manually paying or allowing automatic payments to go through. (Weekly would be better, if you hope to catch fraud.)

Write down or track everything you spend during this first month of getting your finances organized. If you’re just getting started with tracking expenses, it will help to do a little bit every day. When you’re sitting in front of your computer to authorize a payment, mark it in your paper checkbook register. (Your bank will give them to you for free.) Yes, it may seem old-fashioned, but the observer effect notes that the act of observation changes the phenomenon being observed. So, just as Weight Watchers has proven that journaling calories and activity has a positive impact on weight loss, you’ll likely see that the mere act of tracking your expenses to organize them will improve your finances.

When you come from a day of shopping, pull the receipts out of your wallet, and mark anything that drafted from your checking account in your register, and put your credit card receipts in an envelope for easy access. If you follow along daily, it shouldn’t take more than five minutes (unless, of course, you’re a BIG spender), but the value will be returned to you.

Periodically, by checking your online accounts, and certainly once your monthly statement is generated (whether on paper or digitally), check in with your finances:

• Balance your checkbook register, even if you haven’t written actual checks in eons.
• Check receipts against your online bank and credit card statements.
• Visually scan your credit card statements as soon as they arrive, and call to verify anything that looks hinky.

Once you’re familiar with your spending patterns, especially if you rarely use cash, it’s also a great idea to set up an online financial dashboard service with web- and app-based trackers like Mint. But to start this process, you’ll pay more attention to those little drips and drops of funds if you put pen to paper. (We’ll talk more about financial dashboards in the upcoming posts of this blog series.)

Being organized doesn’t just mean sorting the paperwork and digital receipts. It means knowing what you have and where you have it, keeping what works and getting rid of what doesn’t suit your goals.

5) Audit your ongoing expenses.

Clutter piles up when we don’t think about whether we even want or need something. Financial clutter piles up the same way. No matter what you pay monthly, quarterly or annually for a service, if you don’t think about whether you still want it (or want it at that price), your expenses are likely to get out of control.

Comb through your digital and paper records, and consider your subscriptions and ongoing purchases. What purchases duplicate what your household already buys? What could you replace with a better deal? What could you eliminate altogether? Consider the following categories:

Video: Do you have Amazon Prime, Netflix, Hulu, and cable/satellite? Are you watching enough of each to justify keeping them all? (Paper Doll is a huge TV fan, but even I find it’s sometimes worth my while to pause a subscription for a few months when life is too busy to catch up with all my stories.)

Audio: Do you have satellite radio in your car, like Sirius XM? What about subscriptions to Apple Music and premium streaming music via Spotify or Beats? If you already have Amazon Prime, could you scale back on paid streaming? Could you bear to listen to commercials and drop from paid streaming to free versions?

Reading: Do you have ongoing (digital or paper) magazine and newspaper subscriptions that you never get around to reading? Do the magazines pile up until you guiltily toss them in the recycling bin?

Communication: They’ll have to pry my landline from my cold, dead hands, but for some people, the switch to mobile-only makes good financial sense. Also, have you checked to make sure your cell phone plans line up with the number of minutes, texts, and data you use?

Computers: From Evernote to Dropbox for storage and collaboration to the various plugins that keep a blog running to software and app subscriptions and upgrades, there’s a truth to be told. Just like with some relationships, when it comes to some digital loves, the bloom is off the rose.

Gaming: Paper Doll doesn’t judge. (OK, she does, but…) If you’re actually playing and enjoying the various MMORPG or online or interactive games for which you pay, more power to you. But if your digital ranch has long gone untended and you haven’t logged in for a long while, it might be time to cull the herd.

IRL, or In Real Life: Do you belong to a gym, associations or clubs? Do you go often enough to make the fees expenses worth what you’re paying? If you haven’t been active in a while, cancel, or see if your membership can be suspended for a few months, until you can gauge your interest.

Gifts: Do you automatically renew your grandpa’s golf magazine or your BFF’s CatFancy? Make sure they still want these particular benefits of your largesse. (And, in general, think about giving gifts of experiences rather than tangible objects.)

Professional expenses: Do you need to renew dues or pay for certifications or licenses? Just make sure you still participate in all of those activities before continuing to rack up expenses.

Just as with our new year, this is only the beginning. The rest of this series of 16 financial organizing strategies will share more tips about organizing your financial paperwork, budgeting with the help of technology, lowering your expenses, streamlining how you get paid, and more.