Help Me Retire Podcast - Episode 30

How to declutter your finances

Show notes:

All right... if you’ve had enough with all the papers you don’t know whether to keep... all the account statements... important notices you get in the mail every day... the legal documents you don’t know where to file...

If you’re ready to get serious... about getting rid of some financial clutter...

If you’re ready to rid yourself of the mental clutter that comes with it...

Well, don’t hit pause...

I’m about to share with you... a simple... five-folder system to get your financial life organized once and for all...

This is the Help Me Retire Podcast… with your host… Mike Brown… Senior Wealth Advisor with Raymond James Financial Services… and head of Brown Family Wealth Advisors…

Mike is the best-selling author of Your Way to True Wealth: How to Make It Happen, Make It Last, and Make It Matter…

He and his team have been helping clients pursue their dreams of financial independence for the past 30 years… and in the Help Me Retire Podcast… he’ll share his best ideas with you…

And now… here’s Mike…

Take a look through all the stuff you get... stuff you wonder if you should hang onto... account statements from the bank... 401-k, investment accounts... insurance policy updates... “important notices” you get from the credit card company...

What are you supposed to do with all that paper?

I talk to retired people every day... here’s what they tell me is stacking up...

401-k statements from previous employers... little brokerage accounts they didn’t know they had...

Old insurance policies... some of which they don’t even need anymore...

Checking... savings account statements from multiple banks...

They’ve got old tax returns... old receipts... years mixed together... and that’s causing extra headaches at tax time...

Subscriptions... bills for things they sometimes don’t recognize... some of which are still getting automatically renewed every month or every year...

Sometimes it’s legal documents... wills... trust documents... where does this stuff need to go?

And we’re just talking about piles of paper so far... there’s also digital clutter... multiple log-ins... passwords on sticky notes... financial documents saved in random folders on your home computer...

And the bigger this pile gets... the more they get frustrated... confused... overwhelmed by it all...

You retired to have some fun after all... not spend half your time being an unpaid office clerk...

Well, here’s some good news...

You probably don’t need to hire Marie Kondo or another professional organizer to take control of this...

You can start with a simple system... one based on just five folders... that will help you clear the clutter... reduce stress... and make faster... better decisions in the future...

I’m going to share with you a system I discovered... to bring some order to those piles of paper we’re talking about today...

I don’t know if this fits with your sense of order... but if you’re struggling with all the papers you receive all the time... this might help you...

First thing... just get everything in one big pile... one big stack of papers...

There, that’s already an improvement, right?

Now, we’re going to sort this big pile... into five smaller piles... based on what kind of documents you’re looking at...

You can create five folders... five boxes... however you want to separate it...

The first folder... we’re going to label “Everyday Money”...

This your day-to-day folder...

This is where you keep information on your checking and savings accounts at the bank...

Keep your monthly credit card statements in this file...

Other regular monthly bills... gas... electric... phone... internet...

If you’re getting a regular cash flow of income... keep documents related to this as well... pension deposits... Social Security... required minimum distributions... automatic cash transfers...

This is the folder that answers the question... “How does money move into and out of my life... my budget... each month?”

People collect a lot of clutter in this category... accounts you don’t use anymore... old credit cards... automatic payments you’ve forgotten about...

As you sort this first pile... make note of which accounts you’re actually using... which ones can be closed or consolidated... which subscriptions you might want to cancel...

Folder number 2... call it... “Safety Net and Insurance”...

The stuff that goes in here is all about protecting your lifestyle...

Here’s where you keep homeowners and car insurance policies...

Umbrella liability coverage...

Life insurance policies... and statements...

Information on any long-term care insurance you might have...

Health insurance documents... anything related to Medicare you want to hang onto...

Now... as you’re putting this folder together... start thinking about where policies might overlap each other... coverage you might not need anymore... or insurance documents you don’t understand as much as you should...

Don’t sweat the details yet... just make note of what coverages you have... why you have them... and who to call in case something happens...

Let’s move on to Folder Number 3... which we’ll label... “Investments and Retirement Accounts”...

You should know what goes into this folder...

Account statements on your IRAs... 401-ks... 457 plans...

Brokerage account statements... mutual funds... annuities... anyplace you have money invested...

Our clients might keep their quarterly performance reviews in a folder like this... and just hang on to the most recent quarter once you’ve reviewed it...

So, as you review these investments and retirement accounts... try to understand what each account is for...

Are there old accounts you might be able to consolidate... and make your life simpler?

It’s also where you make note of where your investment income comes from... how much from interest... how much in stock dividends...

I always remind our clients to pay attention to that investment cash flow... because we want to see that number increasing every year... faster than inflation...

That’s the key to True Wealth...

Folder Number 3... investments and retirement accounts...

On to Folder Number 4 now... let’s call this one... “Taxes and Big Transactions”...

What’s in it?

Copies of your tax returns... records of large charitable gifts...

You know... I tell our clients that it’s a great idea... in January of every year... to have one file just to collect your tax documents as they come in...

By the time you do your taxes... or take them to your tax preparer... this one simple habit could save you hours of looking for everything at tax time...

And the more organized you are... the easier it’ll be on your tax preparer... which might just save you time and money each year in getting those taxes filed...

What do we mean by big transactions?

Home purchases or sales... major capital gains events... IRA rollovers...

Instead of mixing your current-year tax documents with old files... this folder keeps everything for the CURRENT tax year in one place...

And then, once you file... you can move it to a longer-term archive... and start fresh for the new year...

So... as you sort through your big pile of paperwork... which is now getting smaller with each step... pull out anything related to taxes and big transactions... and keep it in Folder Number 4...

You might also keep things like notes on planned Roth IRA conversions in this folder... any tax strategies you’re in the process of implementing with your advisor...

Final folder... Number 5... we’re going to call... “Legacy and Critical Documents”...

This is the... in-case-something-happens... folder...

Here’s where you store copies of your will... trust documents... powers of attorney... for financial and health care...

You’ll want a copy of your living will... or advanced directives... in this folder...

And here’s a big idea... make a complete list of all your key accounts... and how to access them,...

Contact information for your financial advisors... attorney... tax professional...

Once you’ve got this folder in place... now you realize this one’s not just about paperwork... it’s about clarity...

It’s about making life easier for the people you love...

You’re making life simpler for the people who might be settling your estate one day... or helping you when you need them to in the meantime...

Once everything you truly need has a home in one of these five folders... the rest becomes a much easier decision...

You’re either going to trash what you don’t need anymore... shred it...

Or maybe it’s something you need to ask someone else about... something you might not understand well enough...

All we’re doing now... is putting together a simple framework that’ll make it faster and less stressful to make financial decisions in the future...

So now... you’ve got your financial life sorted into just five neat folders...

Here’s what we do with them...

As you look through each one... make a to-do list based on what you see...

Do you need to close or consolidate unused bank or investment accounts?

Should you update beneficiaries on your IRAs... 401-k... life insurance policies?

Can you consolidate your investments accounts... so that all your financial assets are pulling in the same direction?

Maybe have your insurance agent review your coverage... for gaps... and overlapping policies...

And let’s put the will and powers of attorney on this to-do list... make sure everything’s up to date...

You don’t need to get all these things done right away... just prioritize the list... and spread them over the next several weeks or months...

Next step... now that you’ve got all this stuff in front of you...

Make another list... a one-page summary of where your key financial accounts are held...

Where your income comes from...

Who you beneficiaries are...

Where your legal documents are stored...

Who to call... contact information for your financial advisor... attorney... tax professional...

Again... this is a great list to have ready for your spouse or loved one...

So, you’ve got your five folders... your to-do list for the year... and your summary of key information...

Last step is to put a reminder on your calendar... schedule an annual financial spring cleaning session... anytime during the year... a lot of people like to get this done early in the year...

Pull out your five folders... update what needs to be changed... and get rid of things you no longer need to hang on to...

Just remember... when your life is cluttered... every financial decisions feels heavier than it should...

When your financial life is organized... when everything fits into a few clear folders... decisions get easier... your confidence goes up... and your blood pressure goes down...

Give it a try... and if you need help... just let us know...

Thanks for listening today... I’m Mike Brown...

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Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC.

Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.  Brown Family Wealth Advisors is not a registered broker/dealer and is independent of Raymond James Financial Services.

Any opinions are those of Mike Brown and Brown Family Wealth Advisors and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a recommendation. There is no guarantee that these statements or opinions will prove to be correct. Investing involves risk, and you may incur a profit or a loss regardless of the strategy selected. Past performance is not indicative of future results. Prior to making an investment decision, please consult with your financial advisor about your individual situation.