Now that we have made it through another tax season, it is finally time to look forward to Spring. Although, depending upon where you live, the spring season could be fleeting as they often are in the state of MI. Regardless of the weather, Spring from a financial calendar standpoint means it time to get organized.
Not having all your financial information at your fingertips can seem like a daunting task to bring together, and even worse, be one of the emotional barriers that prevent you from taking that first step in the wealth planning process. Can you relate to the following dialogue?
“This is going to take a ton of time and effort. I’ll just put this off until later.” (Procrastination)
“Ugh, I’m realizing now that I don’t even know where some of this stuff is! I’m going to have to reschedule the meeting. It’s too humiliating to go into a meeting and have to admit my financial house is in such disarray.” (More procrastination, rescheduled meeting)
“I’m so embarrassed I don’t have all the data my advisor needs to start the process. If I ignore the advisor and how awkward this whole experience has become, maybe it’ll just go away.” (You decide never to reschedule)
Rather than creating additional stress and burden, I don’t expect you to bring anything to a first meeting except to talk about you, and I could help. By lowering expectations, it helps put people at ease where we can talk about the wealth planning process and how to get organized.
How to Get Organized
To begin with, you will need the following;
- A box like this
From here the process starts like this;
- Sort through paper statements and existing files
- Begin to identify documents that you need to keep and those that need to be shred. (See below for guidelines on what to keep and for how long)
- Create a file folder for each of your accounts and other documents as you sort through the paperwork.
- As you go through your documents and sort them into folders, set aside documents that include information that you will need to prepare your wealth management plan.
- Documents could include tax returns, investment statements, insurance policy statements, bank statements, etc.
- Contact companies for any missing statements, policies, or other key documents
- Log into any online accounts that may be available. If online access hasn’t been configured, set it up on the spot so that you can access the new online accounts.
- If there are any accounts or other pertinent documents that you might need but don’t have access to online, look up the contact information for the company, and call on the spot to request information. Ask how to gain online access or, if not available, a copy of the most recent statement/policy/document/whatever to be sent to your address of record.
- Be sure to create a file folder so you know where to put the information when it arrives in the mail.
Let Your Client Portal and Technology do the Heavy Lifting
At TAMMA, I use two incredibly resourceful tools to help clients manage their personal and financial lives. The first is their client portal, and the second is their OneDrive folder.
A client portal is an online tool where clients can access all their financial information in one location. Investment, checking/savings, credit cards, just about any financial account can all be accessed in one location. For most people, it’s likely the first time they have seen a complete picture of their financial statements — a foundational piece to the wealth planning process.
Mint.com, which is owned by Intuit (makers of QuickBooks & Turbo Tax), offers a limited version of this type of client portal.
While you have your physical box of documents, OneDrive offers you the ability to store your documents electronically and share them with key people such as your advisor, attorney, or family members.
OneDrive is a Microsoft product and integrates very easily with their Office products such as Outlook, Word, and Excel. There are other cloud service providers that you could utilize as well, including Box, Dropbox, GoogleDrive, and Apple iCloud.
Once you have all your documents from step 2 identified, step 4 would be to scan those files into your cloud storage folder. You will want to create folders just like you did in your physical box, such as Tax, Investment, Insurance Policies, Bank Accounts, etc.
Guidance on What to Keep
- Tax Documents
- Err on the safe side and hold onto your tax documents for seven years.
- Note that you’re not just hanging on to the return itself, but to all the documents related to that return: W-2s, 1099s, mileage logs, documentation of charitable contributions, and so on.
- Investment Statements
- It’s a best practice to receive your investment statements, whether for your 401(k), IRA, or taxable brokerage accounts, electronically: Not only will you reduce the threat of identity theft that accompanies the mailing of paper statements, but you can also avoid account-maintenance fees that can be levied upon recipients of paper statements.
- If you do maintain a taxable brokerage account, you will want to keep annual statements to calculate an accurate cost basis.
- If you’ve made a nondeductible contribution to a traditional IRA, be sure to keep a record of the transaction, as you wouldn’t want to be taxed on that amount again when you pull money out or convert the IRA to Roth.
- Bank and Credit Card Statements
- Electronic document delivery of credit card and bank statements is again considered a best practice. If you’re still receiving paper statements, they can be shredded upon receipt and review.
- Receipts for Big-Ticket Purchases
- It is always a good idea to hold onto these types of receipts.
- Home-Related Documents
- Hold on to any documentation for the home that you currently own: documentation on the initial purchase, refinancing, or HELOCs, for example.
- Maintain documentation on any expenses when you bought the home or after; legal and real estate fees, as well as receipts for any improvements that you’ve made while you’ve owned the property. You can use those amounts to offset any capital gains tax you might otherwise owe.
- If you’ve sold a house, hang on to those records as long as you hang onto the related tax records–at least seven years after your tax filing.
- Irreplaceable Documents
- The following items are best stored in a safe or fireproof box: estate documents; birth certificates, marriage licenses, divorce decrees, and death certificates; original Social Security cards; passports; articles of incorporation for businesses; car titles; property deeds; and military discharge papers.
One of the final steps, with a mind for online security, is another technology platform that I suggest people utilize, which is a password manager. I personally use Dashlane and highly recommend it.
Dashlane helps you to not only create a master list of websites that you use; it helps you generate and maintain secure passwords. They have a few plans to choose from, some of which offer personalized security alerts and fraud protection.
Now that you have your financial life, and potentially part of your personal life now in order, we can have a shredding party! All of the documents that we identified in step 1 that are no longer needed or outdated can be securely disposed of via your shredder.
The Benefits of Getting Organized
I cannot emphasize this enough; the benefit of getting organized is that you will literally be more organized both personally and financially than you may have ever been in your life. Additionally, you now have a system to maintain that organization in the future. You can walk away with a sense of accomplishment that you’re taking measurable, tangible positive steps towards improving your financial future!
There are additional emotional and tangible benefits to having all your critical personal and financial documents together in one physical and/or cloud-based solution which include the following;
- Created a gift for your loved ones so that if anything were to happen to you, all your information is easily found in one location with key people to contact
- Beginning the wealth planning process with all your critical information in place, which leads to developing a plan that is better suited to your needs and wants with a higher probability of success in achieving your plan.
- The wealth planning process becomes more effective as you are not weighed down by previous fears and burdens because you can finally see the big picture of your financial life. This leads to increased engagement and knowing why this process is important to you.
The reality is that most people aren’t financially organized, so don’t pressure yourself or feel guilty about not having all your financial information at your fingertips. I hope this process shows you how you can get organized and take those critical first steps in the wealth planning process.
If this process seems too much, or you know that you need support to get started, we are always here to help. We want to be of service to help solve your problems and provide you with peace of mind.