Ten Financial Resolutions Worth Keeping
For many, the magic of the season begins to fade as soon as we realize how much we spent on the holidays and calculate how big our credit card bills are going to be. On the bright side, the New Year offers the perfect opportunity to set attainable financial goals. Following are some examples of financial New Year’s resolutions worth keeping.
- I will make informed financial decisions, understanding the difference between wants and needs.
- I will communicate with my family about money matters so that we are all working toward the same goals.
- I will be aware of the effects of advertising on the financial decisions I make, and resolve not to be influenced by them.
- I will take care of my finances today by tracking expenses and creating a budget that is flexible and realistic.
- I will take care of my finances tomorrow by saving for my future.
- I will meet the credit obligations I have made on time and as agreed.
- I will continue my personal education about financial health, budgeting, credit, and personal debt.
- I will plan for periodic expenses, including the next holiday season.
- By good example, I will teach my children the importance of budgeting, saving, and the wise use of credit.
- Finally, if I am over-obligated, I will take the necessary steps to seek assistance.
However, setting financial resolutions and keeping them are two different matters. In fact, many Americans are still paying off the ghosts of many holidays past. To help keep your financial resolutions, make goals that are realistic and flexible. If you set your goals too high, frustration will keep you from keeping them.
Start Fresh: Clearing Out Clutter From Your Life
How does clutter begin? A junk drawer with old batteries, gum, and receipts? A desk full of abandoned paperwork? Pretty soon your dining room is looking like a thrift store with clutter all over the place, and you’re not even counting the garage or the attic!
The problem with clutter in your life is that it reduces your effectiveness. It gets in your way, impedes free movement, blocks progress and essentially keeps you from living your life at 100%.
If you’re spending your life chasing yourself in circles, always trying to clean up messes, you sacrifice the time you would spend doing productive work. You won’t end up brainstorming new business or education ideas, you won’t fine-tune your systems, and you won’t check in with your investments.
Clearing clutter means simplifying, streamlining. A clutter-free home is the first step toward real freedom.
Then There’s Financial Clutter…
Financial clutter is especially troublesome. Financial clutter can block your progress toward a clear financial plan, and the cost can be tremendous as well.
- Unpaid bills: If it’s hidden under a pile of junk mail, it’s likely it’s not going to be paid on time. Late payments can hurt your credit score. Even worse, you might come home ready for a shower and there’s no water. After checking your pipes you realize you never paid your bill thanks to the clutter in your in-box.
- Identity theft: That statement you accidentally threw in the trash without shredding is a criminal’s treasure. Say hello to a world of heartache when he opens accounts in your name. The process to clean up your credit record after identity theft is tedious and sometimes costly.
- Lost accounts: Sounds far-fetched? It happens all the time. Lose the paperwork and some people forget an account ever existed. Out of sight, out of mind.
- Inability to borrow: The dossier of documents a bank requires to loan money is tremendous. If you can’t locate what they need, you don’t get the money.
- Duplicate spending: You come home with a new purchase only to find you already have it. No surprise, though, because it’s been buried and unused for years.
- Stress: Being unaware of exactly where you stand financially is a tremendous burden. Searching in vain for your checkbook can seriously raise your level of stress.
In addition, when you de-clutter your home you will surely find a lot of items you don’t use any more that could be sold for financial gain. Old jewelry, investments, art and collectibles can all help add to your healthy New Year financial plans.
Steps to Get a Grip on Financial Clutter
Step 1: Sort Your Financial Files
Set a timer for 30 minutes during which time you will sort the contents of your financial files (in whatever form they are: cardboard boxes, file cabinet, plastic tubs, etc.). Make three piles, each containing documents concerning:
- Things you own (for example, your car, your home, large appliances, etc.)
- What you owe (for example, student loans, monthly bills, credit cards, etc.)
- Things you save (for example, bank accounts, retirement savings, hard assets like art or jewelry, etc.)
Step 2: Get Rid of Obsolete Items
Refer to the following guidelines to help you decide what to keep and what to toss.
- Keep sales receipts until the product warranty expires or until the return/exchange period expires. (If you need sales receipts for tax purposes, keep them for three years.)
- Keep ATM printouts for one month, or until you balance your checkbook. Then they may be thrown away.
- Keep paycheck stubs until you have compared them to your W2s and annual social security statement (usually one year).
- Keep paid utility bills for one year unless you’re using them for tax purposes (deductions for a home office, etc.). In that case you need to keep them for three years.
- Keep cancelled checks for one year unless you’re using them for tax purposes. In that case you’ll need to keep them for three years.
- Keep credit card receipts for one year unless you’re using them for tax purposes. In that case you’ll need to keep them for three years.
- Keep bank statements for one year unless you’re using them for tax purposes. In that case you’ll need to keep them for three years.
- Keep quarterly investment statements until you receive your annual statement (usually one year).
- Keep income tax returns for three years.
- Keep paid medical bills and cancelled insurance policies for three years.
- Keep records of selling a house for three years as documentation for Capital Gains Tax.
- Keep records of selling stock for three years as documentation for Capital Gains Tax.
- Keep annual investment statements for three years after you sell your investment.
- Keep records of satisfied loans for seven years.
- Keep contracts as long as they remain active.
- Keep insurance documents as long as they remain active.
- Keep stock certificates as long as they remain active.
- Keep property records as long as they remain active.
- Keep stock records as long as they remain active.
- Keep records of pension and retirement plans as long as they remain active.
- Keep marriage licenses forever.
- Keep birth certificates forever.
- Keep adoption papers forever.
- Keep death certificates forever.
- Keep records of paid mortgages forever.
Step 3: Find a Location for Your Financial Files
It’s the same principles as with home organization: items you use frequently should be stored with easiest access. Those you use less frequently may be stored a little deeper. Short-term financial obligations like monthly bills, short-term savings accounts, etc. should be on top of your desk or in the top drawer of your filing cabinet so they remain in the front of your mind. Things like retirement savings paperwork, warranties, etc. can be stored in the second drawer.
Step 4: Keep It Up
Now that you’re de-cluttered and out of the dark, spend a little time each day to maintain your confusion-free financial state. That may sound tedious at first, but think about how much time you spend each day doing things that are far less important to your future than keeping your finances organized.
There are a great number of automated computer programs available to help you stay on top of things. Online banking, bill paying and budgeting programs can accomplish financial organization tasks with the click of a button or two. Learn to sort your financial paperwork as soon as it appears, and when all else fails… start at step 1!
Balancing Your Checkbook
Whether you do your banking online or the old-fashioned way with a paper check register, keeping your financial world clutter-free requires periodic verification and clean up. Although just about everyone pays bills, a surprising number of people do not know how to balance their checking accounts. In fact it is a very simple procedure that only takes about 15 minutes a month.
- Make sure the amounts written on your checks match the amounts recorded by the bank on your bank statement. Check off in your check register the amounts that appear on your bank statement. You will probably find that some of the checks you have written do not yet appear on your bank statement. We’ll get to those in a minute. Leave those unchecked.
- Remember to do the same thing with ATM withdrawals and debit card purchases if you do not have them recorded in your check register yet.
- Go through the same process with deposits you made into your account. Check off each deposit you recorded in your register with the deposits that appear on your bank statement.
- Be sure to refer to your bank statement to record any bank fees (monthly service charges, safe deposit box fees, check printing purchases) that your bank has recorded and include those in your check register. Check these off too as you record them.
- Make list of the checks, ATM withdrawals and debit card purchases that you did not place a check next to, in other words the transactions that have not yet been posted to your account (we referred to these in step 1). Calculate the total of this list and keep it handy.
- Now make a similar list of deposits that remain unchecked. Calculate the total of this list and keep it handy as well.
- Now you’re ready to calculate your balance. Take the figure called “ending balance” from your bank statement as a starting point. Add to it the total you got for un-posted deposits from step 6.
- Subtract the total checks, ATM withdrawals and debit card purchases from step 5 from the total you ended with at the end of step 7. This amount should match the ending balance from your checkbook register. If it doesn’t, re-verify that the amounts from your check register and bank statement match (make sure you didn’t enter $45.25 as $54.25, for example). It’s as simple as that!