Whether you are new to “adulting”, have a new or new-ish marriage, or are dealing with a major life transition later in life through divorce or death of a partner, many people can find themselves overwhelmed and grappling with the various puzzle pieces of their financial lives. So how do we even figure out where to begin?
As with any challenging puzzle, the starting point is to gather all of the pieces, and turn them over to see the parts of the picture that they form. Most puzzle experts will tell you to start with the borders of the picture. I recommend that as you begin pulling the pieces of your puzzle together that you organize each of them, starting with labeled file folders, or folders you create on your computer where you will scan relevant documents. You will still have some paper documents to organize as well.
What Are the Borders/Broad Outlines of Our Financial Picture?
Income: what are all of your sources of income? Put all your documentation for these into a folder of some sort.
- Employment, W-2 or self-employment income
- Social Security, Disability or other
- Royalties, dividends and interest
- Spousal support or other not identified
Expenses: Next, I suggest figuring out your current expenses. You can use the following to start building this picture:
- Bank statements- if you do not receive paper statements, figure out how to log in on line to get the last 12 months of your bank statements; be sure to access all existing bank accounts.
- Credit card statements- it is a great idea to have a separate folder for each credit card, and if you can get 12 months of statements for each, great.
Spreadsheet: Once you have these pieces gathered, I suggest you create a spreadsheet, in excel or on paper, where you list your projected monthly and annual income, and then make a list of all of your expenses, when they are due and how much they are.
- Break them into categories such as Utilities, Groceries, Medical and Entertainment, as well as those expenses for which you receive statements with a due date.
- Don’t forget to check or find out if your mortgage payments include taxes and insurance, or if these are separate payments that you make annually, etc.
- If you are carrying a balance on credit cards, make columns listing the outstanding balance of each and the interest rates you are paying.
Now that you have figured out the money coming in and going out, you can turn your attention to the rest of your financial picture.
What other Financial Accounts do You Have? Gather and Enter on a Second Spreadsheet:
- Banking, Savings, CD’s, etc: where are they, how much is in each, and what is the term/length of the CD’s? These could probably all go into the same folder.
- Retirement Accounts: 401K’s, IRA’s, Roth IRA’s, etc.? Find a recent statement for each of these, and figure out the current balance of each, and who is the custodian, or the company that holds each of them. You will need your list to includes the owner of each of these, the type of account, and if possible, the beneficiaries that have been named on each of them. Make a separate folder for each of these.
- Other Investment–types of accounts: this can include brokerage or investment accounts, mutual fund-type of accounts, crypto-currencies and annuities. Please note that with annuities, you will not only need a statement, which often comes out only once per year, but will also need to track down the original contract. Make a separate folder for each of these.
- College Funding: If you have ownership of a college fund account such as a 529 or children or grandchildren, or perhaps what is known as a custodial account, which a minor will take possession of upon reaching age 21, usually called an UTMA, you will need to gather together all of the information related to these accounts. Again, separate folders for each.
- What do You Own? Property, Vehicles, etc. If you own property, or are in the process of paying for property such as with a mortgage, you will want to find the documentation for each that includes:
- Titles and/or mortgage contracts, and loans, including interest rates for homes and other real estate.
- If renting/leasing your residence, find your rental agreement. (also entered on expense worksheet)
- Titles and/or purchase or lease agreements for vehicles- if paying for a vehicle it should also be listed on your expense worksheet
- Collectibles, art, jewelry, other.
- Business- what type, owners, etc.Is there any business debt? Gather your info together.
- Stock certificates
Make a folder for each of these, along with all relevant documentation.
Tax Returns: Where are they?
Gather up the last five years of your tax returns. If you have kept every tax return for the past 20 years, put the extras in a box that will need to be shredded. Actually, the same principle applies to statements that go back 10 years or more, unless you have been instructed to retain them for some purpose, such as instructions from an attorney. Put the tax returns you will keep (five years at a time) in a location where you can readily access them: a filing cabinet, file box, etc. When you get a new one, you take out the oldest one and shred it, thus keeping only five years at a time.
Insurance: You will need to locate all of your current insurance policies and statements, and again, make a folder for each of them. Please add your premiums to your expense spreadsheet, if you have not already done so. You should check for each of the following, though you may not have all of them:
- Homeowners insurance
- Auto insurance for each vehicle
- Umbrella insurance
- Life Insurance
- Health insurance
- Health Savings Account
- Long Term Care Insurance
- Any other insurance not mentioned
Finally, Estate Planning and other Personal Documents:
- Powers of Attorney/Living Wills
- Driver’s Licenses, Passports, ID’s.
- Marriage Certificates/Divorces
- Death Certificates
- Military Discharges
Congratulations! You have successfully gathered up all of the pieces to your financial picture, and have created order out of chaos. You are now ready to either work with your chosen financial professional, or begin to educate yourself to walk through the next steps of what to actually DO with all of the pieces.