Lehigh Valley Woman – Finance Section – April/May 2012

by Laurie A. Siebert, CPA, CFP®, AEP® Vice President, Valley National Financial Advisors

In our last correspondence, we discussed preparing for life’s changes.  In this issue, we want you to be prepared for spring!  Spring cleaning in your financial life – that is.  Most of you have just gone through organizing your financial information for preparing your income tax return.  That process may have been easier for some than for others.  Now would be a great time to set up a system so that you are ready and organized for next year and for getting to know the “financial you.” How organized you are in your financial life could be an indication of how successful you are in managing your finances and that contributes to your financial well being.

Many people who have a system and a disciplined approach to organizing their finances are better prepared to make important decisions about budgeting, saving, spending and retiring.  Knowing what you have, what you are earning, what your debts are and how you are spending money requires some sort of system.   That system may employ files, folders, software tracking, boxes or piles.  Let’s go over some basics required in any of these systems and then we will discuss some tips.

Basics

1. You need to have an understanding of your financial records and make the decision to get organized. Employ friends, family or a professional to help you get organized if the whole process overwhelms you.  Get your financial ‘stuff’ together and get an understanding if you do more on paper than online. If you like paperless because you get overwhelmed by paper, then go paperless.  If you work better with paper, set up files in a place you can access.  Financial organization systems are available, if you need help or a recommendation, feel free to contact me at lsiebert@valleynationalgroup.com.
2. The system needs to make sense to you and be accessible. What’s common sense for one person may not be to the next.  You may want to organize your monthly bills in a small accordion file and your more permanent papers, like bank statements, in a file system. A hanging-file system works pretty well for most people. Even if you do online bill paying, you will still need a filing system for more permanent papers like insurance policies, Wills, Powers of Attorney, etc – you may keep these in paper or scan them and file them electronically. Either way, you will need a secure filing system and know how to access your information quickly and file it quickly.
3. There has to be some discipline in utilizing the system.  Once you have a system set up, you have to make sure that you are going to use it and not get overwhelmed by it.  How are you going to do that?  Come up with a system and stick to it – that’s what discipline is.  Are you going to file as you go, or do your paperwork once a month and manage it then?  If you only manage the paperwork once a month, what is your system for aggregating until you file?  You might have an “INBOX” in a conspicuous place so that you remember to handle the filing timely.
4. Manage the system.  Know when to file, purge or archive your financial records and what records to retain for indefinite periods of time. Make this part of your system.

Tips

1. Set up where you are going to have the files – cabinet or computer.
2. Set up the INBOX.
3. LABEL THE FILES. For example: Bank accounts, retirement accounts, insurance.
4. Establish sub-files, if necessary.  Like “my 401k, his 401k, my IRA, his IRA” in the retirement account folder.
5. Set up TAX FILES with sub-files. Example: Income for 1099s and W-2s and Deductions for Charity, Medical Expenses and taxes paid.
6. Set up ARCHIVE folders at the end of the filing system – for those documents that you must keep for a long time but don’t need to access regularly.  Example: Tax returns.
7. Set up an INDEX – keep this at the front of your filing system so that you quickly know where to file your important documents.  See the example of file names above.
8. FILE – from the pile of “financial stuff” that you gathered, file it, archive it or dispose of it. Know when to dispose of important papers and how to protect yourself from identity theft.  Shred any personally sensitive information.

Keep

1. Birth certificates, Marriage certificates, military papers.
2. Documents such as Deeds, your Will, Trusts, Power of Attorney, Health Directives, Living Will, Divorce decree, separation papers, custody agreements.
3. Lists and appraisals of your valuables, list and policy numbers of your insurance, lists of valuables held elsewhere like a safe deposit box.
4. Tax returns

In summary
Be proactive, not reactive.  Start spring cleaning with your financial life and make the best of your financial choices. For more help, feel free to contact me at 610-868-9000 or at my email shown above.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication, including any attachments, is not intended or written to be used, and cannot be used, for the purpose of 1. avoiding penalties under the Internal Revenue Code or 2. promoting, marketing, or recommending to another party any transaction or matter addressed herein. Valley National Financial Advisors is the marketing name for Valley National Group, Inc. and its affiliates. Securities offered through Valley National Investments, Inc member FINRA, SIPC, 1605 Valley Center Pkwy, Suite 160, Bethlehem, Pa 18017 (800) 383-8297.