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Spring Cleaning: Organizing Your Financial Junk Drawer

Spring Cleaning: Organizing Your Financial Junk Drawer

January 30, 2017

Over the last few years, I have met with hundreds of individuals and families and there has been one common theme in helping each of them. Financial Organization.  Not necessarily the paper aspect of it (tax returns, investment statements, insurance policies, debt and credit card statements, etc.) but the decision making part. 

Whether you realize it or not, every financial decision you make in your lifetime is related to another aspect of your financial picture.  For example, your decisions on those benefits you enroll in at work every year (such as the 401(k), 403(b), or stock option plan in which you participate), your withholdings and deductions on your tax return, and how much you decide to put down on a home, all have an impact on one thing.  Your cash flow!  Each decision you make will always impact your cash flow, which is the money you have coming in for you to give, save, invest, or spend.

With all that being said, here are a few ways for you to clean up your financial “junk drawer” as we get ready for spring cleaning 2017 (or if you are here in Atlanta, as we get ready to enjoy our early spring without the high pollen count):

  • How do you get paid and how much money do you have coming in? It all starts with income.  Take your salary, commission, bonus, and any other passive income and add it all up.
  • What is your savings goal for 2017? If you don’t have a goal, I’m pretty confident your chances of hitting it are slim (or zero).  How much do you need saved by April?  July?  October?  December?
  • If it is important to you for others to enjoy the fruits of your success, who and how much do you give? Break this down each month.  Church gets X this month, this charity that is important to my spouse gets Y this month, and another organization that is important to me gets Z this month.
  • 2017, the year we get out of debt (or make a big dent in it). Fast forward to January of 2018. How would it feel to have $10,000, half, or all of your debt paid off?  Look at your credit cards. How many do you have, what are the balances of each, and what are the interest rates?  Now take a deep breath, go on, and look at possibly doing a balance transfer or talk to your bank/credit union about a personal loan.  They may offer you an 8% loan and if your credit cards are 20%+ that might be a good idea.  And you will have consolidated all of your debt which means fewer bills.  Also, depending on your student loan situation, it may make sense for you to do a Direct Consolidation Loan (going from multiple loans down to one).
  • Have you changed jobs over the years? I cannot tell you how many people I have met with who have old retirement accounts just sitting at their previous employers not being managed, or worse, that they can’t even find.  Go back to your old employers, get your most recent statements, and consider consolidating them to your current retirement plan or rolling them into a professionally managed Roth or Traditional IRA.
  • When was the last time you sat down and reviewed your auto and home insurance and any other insurance policies? People make insurance decisions all throughout their lifetimes.  Over time, people accumulate many different policies and combine finances with a spouse and employer benefits.  Oftentimes there are voids, duplications, blind spots, and wasted dollars that leave people vulnerable.
  • Have you gotten engaged or married? Combining two different financial lives into one can be very complicated, however it shouldn’t be.  One of my business partners, Andrew Matthieson, wrote an article for newlyweds combining their financial lives.

As a bit of advice, don’t take all of these items and try to do them at once. You may end up not accomplishing any of them. Pick one most important thing to you right now and get it knocked out over the next month.  Then pick a second and give yourself another month. And continue from there.

You have so much potential in this life, don’t let it go wasted because you give yourself the excuse “Oh, well, I have time to do that”.  Yes, you have all the time in the world, however if you don’t start now, it won’t get any easier once you have one or two mortgages, a few car notes, kids in school, after school activities, and much more going on.  Plus, time is precious and the only thing we are guaranteed is the present time. Which is why you need to enjoy it, not live in stress, and clean up your financial junk drawer!

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