Organization is first step to financial success

In my last article, I described how you could use your tax returns to help you improve your tax situation for next year. Continuing with the theme of using what you already have to improve your future, we will cover getting your information organized so you can make good use of it.

Getting organized allows you to extract wisdom from piles of raw data. Let's look at deciding what to keep, how to track the important things and how to use the information to make improvements.

Today, we have access to all our spending, income, tax and investment data in a split second. We need to organize two classes of information: items we need to keep for history, and separately items we use to make decisions.

Here are some items you should keep in the original form (safe deposit box or other secure location) and electronic copy:

Birth, adoption, marriage, divorce and death certificates and decrees

Diplomas and transcripts; military papers

Social Security cards

Real estate, other assets and loan documents, payoff letters, deeds, titles

Estate planning documents

Keep electronic copies of these items: (Back them

up!)

Tax forms and documentation

Insurance policies

Sentimental photographs

Personal property documentation

Benefit statements -- company, Social Security, insurance, annuity

Investment account statements

For other items that can be retrieved such as credit card and bank statements, you can use the institution's system. One place where you can back up is in an online vault. Check with your financial planner or bank to see if they provide this service. A second place is a separate computer hard drive.

Once you have these historical items in a safe location, you can look at organizing and using your income, spending and investment information. There are a large number of low-cost options available to track your transaction and investment information. Choose one that fits your lifestyle so you can easily keep everything up to date.

A system that will pull information from your bank, credit, loan and investment accounts will only require you to update cash transactions. Some systems allow you to do this by verbally entering the transaction or scanning into your phone. Once everything is in the system, you can set up spending and other categories to make it easier to analyze what is going on in your financial life. Some systems are smart enough to learn from previous transactions, which minimizes the time you spend getting organized.

Check out YouNeedABudget.com, Quicken, Mint, Morningstar (Investments) or where you hold your investments to see what is available. Financial planners, brokerages and other organizations often offer systems as part of their services. It is important that you stick with the program, so take the time to do a trial before making a long-term commitment.

Once you have all your financial information in one place, you can look at your spending to see if it matches up with your goals and what is important to you. Start by looking at broad categories. Are you spending more than you expected on insurance, entertainment, transportation, phone, electricity or something else? Most people find their actual expenses don't match up with what they thought was being spent.

You can also compare your spending, saving and debt levels to other people to see if there are places you can make improvements. This is similar to getting a physical with a blood analysis where your results are compared to healthy levels. By looking at how your measure up over a wide range of parameters, you can get a clear picture of how you are doing toward achieving your goals. The same process applies to looking for ways to reduce your taxes or analyze your investments.

Today it is easy to get all your financial information together in one place and displayed so you can see trends and groupings to make sense of what is going on in your life. The difficult and mundane work is now done for us electronically. This gives you time for the most important part. That is applying your knowledge and experience, as well as advice from experts, to determine how to make improvements. Find a competent partner to help you determine what is most important to your plan, and then find an expert to get you through the details. For example, if you are looking to reduce taxes, your tax preparer may be able to help you determine that your investments create a lot of taxable income. You may then consult with a financial planner to see if changes can be made to lower taxable returns and still meet your savings goals.

It is spring and a wonderful time to get organized and make improvements in your financial life. Get started now!

Tom Roberts, president and financial planner with A New Approach Financial Planning in Lakewood Ranch, can be reached at 941-927-9590 or by email at Tom@ANewApproachFP.com.

This story was originally published May 9, 2016 at 11:36 PM with the headline "Organization is first step to financial success ."