New year, new start, new way to do something, a new opportunity to improve your life… at least that’s how we often start the new year, right? Take advantage of those good intentions to get yourself headed in the right direction, whether it’s related to your health, your home, your relationships, or your money.
You may have thought about or already acted on updating your wardrobe or closet or remodeling a room in your living space. I bet you enjoyed at least part of that process. Maybe we could all benefit from the fun aspect of “remodeling” and apply it to something we don’t often consider fun, like money.
Have you done a Money Remodel yet? Remodel means to remake the structure or style, to fashion anew. That sounds way more fun than “organizing your finances” but that is what a Money Remodel can accomplish. We all likely have room for improvement in the area of getting our financial house in order (which is why I wrote a book about exactly that topic).
Getting and staying organized is the foundation for making wise financial decisions because an overwhelmed or confused mind does not usually think clearly therefore perform effectively.
Compiling a summary and much of the detail regarding your current financial situation can have many benefits. It will assist you throughout your life to:
Additionally, people you care about will absolutely need to know this information if you become incapacitated or after you are gone. Let me provide some tools here that you can use as a guide to:
Before you get started on your Money Remodel, you should first make sure your files are current. Do your files reflect the statements you receive? Do you have a file for bank, IRA, annuity, investment, loan, credit card, etc. statements? Are they in alphabetical order somewhere findable in a file, binder, secure online folder? Once you have a labeled file for everything, you can begin.
To better organize what you have, you must first take an inventory of your finances. My Financial Life at a Glanceis one way to summarize it all on one page. Perhaps that becomes the first page in a summary binder, folder, or file that you compile.
Reviewing the detail of the inventory can help you confirm whether you have homework to do or not. Is everything titled and beneficiaried correctly to reflect your wishes? My Net Worth Summaryis an expanded version of a net worth statement that you could compile to confirm that you have told your assets where to go.
Give a copy to someone you trust or tell someone where to find the information when needed.
I personally like and use the idea of a summary binder. It is truly a My Financial Life at a Glance binder. It contains that one-page summary, then the detailed My Net Worth Summary, and a tab for a year end statement from every asset/loan that was listed in the Net Worth Summary.
Any remaining details like original contracts, trade confirmations for taxable accounts, past year end statements, are all in the filing cabinet. So if there is a fire, I know what to grab. Or my executor or financial power of attorney knows what to grab when needed.
Maybe you are helping aging parents. Perhaps your adult children need some resources in this area. Or many of us are making the time to declutter and organize our lives to simplify life for ourselves. Either way, congratulations for providing this gift to yourself AND those you care about, what a great way to start the year!
How does a Money Remodel sound to you? What other tricks and tools have you used to get yourself to act on a financial task you didn’t really want to do? Can you share something helpful with our community?