Organizing Your Finances

The more carefully you create an organizing system, the easier it will be to use. You may want to consider hanging files with separate folders for each key topic. Also, think about consolidating your retirement accounts into one rollover account to make it easier to know how you’re doing and to avoid duplicate investments.

Think of organizing your finances for retirement as building a foundation. No matter how beautiful a house you construct, it won’t remain standing without a secure physical structure underneath it. To get organized, consider these six tips:
1. Devise a system. To begin organizing your records, create a system that lets you keep track of all your finances, such as your monthly bills and brokerage account statements. “The more carefully you create it, the easier it is to use and maintain,” says Regina Leeds, author of One Year to an Organized Financial Life.
2. Start filing. Hanging files with separate folders are great for the broad topics pertaining to your retirement. Then get even more detailed with your system.

  • In the IRA hanging folder, for example, you may want separate manila folders for periodic statements and forms with your beneficiary designations.
  • The homeownership file should have discrete files for mortgage paperwork, real estate taxes, and receipts from home improvement projects (you’ll need those receipts when calculating taxes due on the sale of your home).


A tip: Buy folders with two-inch-wide bottoms, not the three-inch versions. The bigger ones often get too heavy and are more likely to rip.

Set aside one day a year to review your filing systems, paperwork, and bill-paying procedures.
3. Organize online. Consider buying personal finance software such as Quicken, which can help you keep track of your accounts and let you set up monthly bills to be paid automatically. Wells Fargo’s free budgeting tool, My Spending Report, lets you parse your spending patterns, showing you where you can cut back so you’ll have more money to save for retirement.
4. Determine if consolidating accounts is right for you. Do you have multiple IRAs or 401(k) plan accounts from previous jobs? Think about consolidating them into one IRA account. You’ll cut down on paperwork and limit duplication among your investments.

Please keep in mind that rolling over assets to an IRA is just one of multiple options for your retirement plan. Each of the following options is different and may have distinct advantages and disadvantages.
  1. Roll assets to an IRA
  2. Leave assets in your former employer’s plan, if plan allows
  3. Move assets to your new/existing employer’s plan, if plan allows
  4. Cash out or take a lump sum distribution
When considering rolling over assets from an employer plan to an IRA, factors that should be considered and compared between the employer plan and the IRA include fees and expenses, services offered, investment options, when penalty free withdrawals are available, treatment of employer stock, when required minimum distributions begin and protection of assets from creditors and bankruptcy. Investing and maintaining assets in an IRA will generally involve higher costs than those associated with employer-sponsored retirement plans. You should consult with the plan administrator and a professional tax advisor before making any decisions regarding your retirement assets.
5. Shred, shred, shred. Don’t throw out old monthly financial statements; shred them instead, to help prevent identity theft: That way, a crook won’t find your account numbers in the trash. A good shredder runs about $200, but if you just have a few stray bills, simply buy a pair of shredding scissors for about $9 at an office supply store.
6. Do an annual checkup. Good organization requires periodic maintenance. Set aside one day a year to review your filing systems, paperwork, and bill-paying procedures. The first weekend after April 15 might be a good time — because you're likely to have all your financial records together — if you can bear to spend more time with them.
Organizing Your Finances
 

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