The Foundation of Personal Finance: Part 1- Get Organized

The Foundation of Personal Finance will be a multi-part feature aimed at helping you start from the very beginning and take you through some necessary steps to becoming both more aware and more involved in your financial life. Every area of study has some core principles that must be understood and followed to lay a foundation so to speak. Personal Finance is no different. Whether you are 18 or 80, the Foundation of Personal Finance series will help get you where you want to be in your financial life.

Part 1- Getting Organized

Seems simple doesn't it? Americans are so busy these days: rush here, rush there, I wish blah blah blah was more convenient. Don't we all? Well, if we don't take a few moments each day to slow down enough to get a grasp of our financial picture, we sure won't have the time come retirement when we realize we haven't saved as much as we hoped to live off of. So, the first step is to track down all those ATM and store receipts, credit card statements, and bank statements to learn where the heck all our money is going off to. Seems like it's gone before we even have enough time to realize that it's there.

That's right, now you remember, huh? That item that had a mail-in rebate you never got around to filling out, the tax refund check from last year you never cashed and now has to be re-issued, stuff laying around the house you would like to post online but can't find 10 or 15 min to take a couple digital pics and upload to an online classified site? These are real examples because they have all happened to me too. Now I look back and see how foolish I was for letting all that money go. Well, here is the chance to redeem yourself! Start gathering now and finish reading this post once you've finished this portion.

Ok, you have all your financial clutter together now right? Now, designate a spot in your house where you will keep all your financial paperwork together because we don't want to have to spend time following that paper-trail again. It could be a desk drawer, a hanging file folder, a mult-part accordian folder, or whatever else suits your needs. I personally use a large 3 Ring binder and keep everything together there. This is the best system I have found that works for me over the years. Each person's ideal system may be a little different.

What should I file and what should I trash? Good question. I always enjoy participation ;-) Well, if you are renting, the most current copy of the lease agreement. Since prior lease terms are no longer in effect or in force, you can shred them. The same goes for all your utility bills including: heat, electric, water/sewer, cable, home phone, cell phone, and internet service. Your most recent statement will note if you last payment has been recieved. Once it has been posted, out with the old statement and in with the new, so-to-speak. Keep paychecks at least until you get your year end statement and have also recieved a copy of your Social Security Benefits statement that usually arrives about 3 months before your birth date. Keep the latest insurance policy to date including home, life, renters, and flood. Expired policies are not worth keeping unless you are comparing your insurance renewal for any discrepancies between desired and actual coverages. Current loan agreements should be kept, but payment stubs can be disposed of when posted to your account.

Bank Statements are becoming a different matter. With tax evasion and global terrorism more prevalent, keeping your monthly statements for at least 3 yrs isn't a bad idea. I review my older bank and credit card statements for major purchases and scan the document for home inventory and insurance claim purposes. You never know what might happen but you want to be prepared in the event it does.

This list isn't all encompassing, as each person's financial snapshot is different to some degree. In Part 2, we will discuss the importance of Tracking your Expenses and why maintaining a record of where you've been is important in determining where you would like to go in financial life.

Tim Haibach
PFDaily