Organizing yourself to financial success

Posted by on August 12, 2008 in Investment Tools

“How do you know where you are going, if you don’t know where you have been?”

I am a big fan of measuring performance through numbers. Numbers have no political agenda or emotions. They simply measure a result. In business, if I spend $10,000 on a trade-show, how much business have I got back from that? If its less than $10,000 then perhaps we shouldn’t sign up again next year. But most of us do not take this type of analysis in our personal lives because we don’t have a proper record keeping system. Watch any television show where they do a financial make-over and what’s the first thing the host does? Makes the person organize their financial lives so they know where they are at. You can’t plan the future without figuring out the results of your past and adjusting accordingly.

When I was a little kid, my parents always argued about our “great” dining room filing system (he says with sarcasm). Everyone just threw the mail into piles onto our dining room table (we ate in the kitchen). My Mom always tried to clean it up and my Dad was always saying “don’t touch my stuff!” (I suspect a lot of you are nodding your heads remembering similar discussions at home). Of course, come tax-time, there would always be a mad scramble to find this tax stub or that statement, buried somewhere in piles.

I am known at work as the pile guy- I file in piles at my desk (gee, wonder where that came from?) but I believe I am pretty good at getting myself organized on my personal finance side. I am not a personal organizer but this is what I do:

  1. I had my desk built-in with a shelf over it when I first moved into my condo. This is where I put all my current filing. My last year’s records are in the condo for easy access and everything else is in storage.
  2. I have two magazine files on my shelf over the desk. I bought them at Ikea for a couple of bucks each. One is labeled “bills” and the other “filing.” As soon as I get the mail, I file into one of the two files- immediately; no mail piles. Everything that doesn’t fall into those two categories, I recycle. Every Sunday I empty out both by either paying the bills or filing.
  3. I have separate binders for the following: (i) financial statement (bank statements, transaction records from stock trades, portfolio statements etc.); (ii) mortgage and condo related material (this is where I keep the legal documents from the purchase of the condo and mail from the mortgage company); and (iii) car and home insurance (my original insurance policies, I keep in a safe). These binders are on my shelf over the desk. If I sell a stock, I immediately find the stub where I bought the stock and stapled them together- it makes it easier to calculate capital gains that way (well… if I actually sold things at profit…).
  4. I have a separate file folder for receipts where there may be a warranty attached to them (i.e. computer hardware purchase, television etc.) and for credit card statements. This I keep in a drawer.
  5. All the tax related correspondence goes into another file folder in a drawer. This helps me keep organized for tax time.

That’s it. I can access data easily, compare against last year (non)performance and don’t have to worry about piles. Plus, its all close to my work area so its contained. This system probably cost me about $25 in binders, file folders etc.

For goals, I have a bulletin board in behind my computer. I write my goals down on a sheet of paper and stick it to the board. I have to stare at my goals every single day. I also put these goals in my binder containing financial statements. Its a reminder of where I need to be every time I file.

If you are reading this blog to get your personal financial life in order then think about literally getting yourself organized first.

Any readers care to share tips on organizing their personal financial lives?

5 Comments on Organizing yourself to financial success

By dc on August 12, 2008 at 9:53 am

Great post, the tips are great. I have a similar system (all file folders) and especially find that keeping tax related items together helps at tax time. I go a step further and have a spreadsheet for tax related items. I update as tax related items come up (track charitable donations, RRSP contributions, child fitness amounts, etc). The file folder is my supporting documentation.

I am the one in our house who does the bulk of our “finances related stuff”. I have created a spreadsheet that lists out what I refer to as our important information and have it password protected. The information I have on it is the information that my wife and/or my executor would need to know if something happened to me/us (bank information, investment accounts, insurance information, SIN # and other information). Rather than having to dig through files, this would summarize our financial lives in the event that something happens.

By Mom2KG on August 13, 2008 at 4:05 pm

Absolutely great post. Readers may know of my family’s ongoing attempts to improve our financial health. One of the first things we did was organize. It was easy, assigned responsibility for everything, and felt like a huge accomplishment. Glad to have your report – we’ll implement some of them.

By Patrick on August 15, 2008 at 12:27 am

I’ll echo the remarks about keeping tax receipts together. Those are the one category of paperwork you are guaranteed to want at some point in the future.

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By Regis on August 28, 2010 at 1:51 am

I recommend using a file folder for medical expenses to be claimed and another for those refunded or not covered by the insurer. This helps you ensure that all expenses are sent for refund. This should be backed up by a spreadsheet for all medical expenses to be reported for the current tax year. The spreadsheet includes the following information by claimant (tax filer): date of expense, provider of service or product, gross cost, insurance refund (if eligible) and net cost. This information is needed when claiming medical expenses. At the present time, the data has to be retyped from the spreadsheet into the tax reporting software . Hopefully, the personal tax software providers will offer this software on a go permanent basis independent of the tax year so that you can simply input the data directly into the software reporting form.

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