If you have summoned your inner motivation and excitement for achieving your financial independence, you are now ready to get going and get organized!
Um, you have summoned your inner motivation, right? I know it’s extremely tempting when faced with a yucky task to hope that your fairy godmother will magically come and whisk it away and take care of it for you…Here is my fairy godmother:
But unfortunately I have found that whenever I wait around hoping that she will magically take care of my yucky chores for me, she’s nowhere to be found! Hello? Fairy Godmother? Hello? I could use a little help here??? Sigh…months later those pesky chores are still there, and still there, and still there, and still there every time I look…waiting for me to do them! Drat!
So if you find yourself in a similar situation, I recommend doing what I do…channel your inner kung fu-ness and decide to kick some butt on your own! Here’s mine:
So if you’re ready now (congratulations!), then let’s get started! I have five simple strategies to help you kick some organizational butt:
1. Do the Worst First
“Do the worst first” is a general success principle that will serve you well in all areas of your life, not just managing your finances. If you can force yourself to tackle the scariest, yuckiest, and most dreaded task or pile of papers first and get it done, you will be rewarded with an instant sense of accomplishment and self-confidence that will propel you forward to bigger and better things all day long!
This is an extremely powerful strategy and one I personally use every single day.
Do you have a mound of bills or credit card statements you are afraid to open? A massive stack of trade confirmations? An account balance you’re terrified of looking at because you’re convinced it’s in the red? If you can force yourself to do just that one thing, whatever the scariest is for you, everything else will seem easy and you will be well on your way to being done.
Try this strategy…it is a winner!
2. Get Rid Of Stuff
As Bruce Lee always says,
“Simplicity is the key to brilliance. It is not the daily increase but the daily decrease. The height of cultivation always runs to simplicity. In building a statue, the sculptor doesn’t keep adding clay to his subject. Actually, he keeps chiseling away at the inessentials until the truth of its creation is revealed without obstructions. Hack away the unessential.“ — Bruce Lee
It’s that last phrase that will help you and guide you the most…”Hack away the unessential”!
The fewer financial papers, receipts, bills, statements, accounts, etc. that you have, the fewer you have to keep organized.
Ask yourself whenever a paper enters your life, “Do I really need to keep this?” For example, once you receive your annual statement, as long as everything that you need is on there you can shred your monthly and/or quarterly statements and save yourself a huge pile of paper!
This works in the digital world, too…do you have “account clutter” or “stock clutter”? As I mentioned yesterday, when Kung Fu Guy and I started organizing our financial life we had a million and one separate accounts (six or seven IRA’s, multiple bank accounts and DRIP stocks, etc.). And inside our multiple brokerage accounts, we had multiple mutual funds, multiple stocks, etc.
It was a gigantic mess, and almost impossible to see what our true asset allocation and investment performance was at any given point in time because we had to sort through 15-20 different account statements, retirement and non-retirement, to get an overall picture of our financial situation. Ugh.
You do need to balance the need for simplicity (Yin) with the need for spreading out your risk among different financial institutions (Yang), but I bet if you take a good look at your accounts and/or statements you can find a few that you can consolidate (do you really need to own Apple stock in 3 different accounts?).
3. Sort What’s Left
Now that you’ve eliminated the obvious clutter, you have a much easier job of sorting what’s left. I have an extremely simple system for our “paper” financial clutter — I use color-coded hanging folders (or you can use binders and a 3-hole-punch) and sort everything into the following categories:
YOUR FAVORITE COLOR (Your Awesome Financial Vision/Goals Papers)
- Monthly Financial Statements (Which you will be creating soon or have created for you…)
- Financial Plan
GREEN (The “good” stuff…Income and Assets!)
- Ordinary Income (paycheck stubs)
- Checking/Savings Accounts
- Brokerage Accounts
- Retirement Accounts
- Commodities/Precious Metals/Other Assets
- Social Security Statements
- Rental Properties
- Business Assets
RED (The “bad” stuff…Debt and Liabilities)
- Credit card statements
- Loans (Personal, Auto, Student, Mortgage)
YOUR LEAST FAVORITE COLOR (Tax Returns)
- Keep one file for the current year so as stuff comes in you have a place to put it
- Save the last 7 years (I only keep the last 2-3 years in the system—older ones are relegated to a box outside in our storage room)
ANOTHER COLOR (House and/or Renter’s Accounts)
- House Title
- Home Improvements
- OR if you rent: Lease, Security Deposit, etc.
ANOTHER COLOR (Will/Trust)
ANOTHER COLOR (Insurance)
- Insurance (Health, Auto, Homeowners/Renters, etc.)
- These are not assets…Your car, your boat/jet-skis/motorcycle, etc…..
- Typically these things cost you money every month and even if you do sell them you will sell them for much less than you paid for them, so while they are “fun” and/or “useful”, they are not really “Assets” so I don’t put them in a Green folder
You do not have to use this system of course; please move it around and adapt or rearrange it so that it works and makes sense for you and your life! The whole point is to take one hour now to save yourself many, many hours in the future (of stress, agony, searching for that one paper/bill/statement you know you had but can’t find…). Future you will thank present you tremendously!
Just “Go all kung fu” and get ‘er done!!!
4. Attack and Label
I really covered this above…this is just the mentality you need to just GET IT DONE… ATTACK!
5. Develop Ongoing System
I have found that for the most part this takes care of itself once I know where everything goes. As papers come in, I just look at them, do whatever needs to be done with them (pay the bill, etc.), and then file it where it goes — it takes about 2 minutes max once you are organized to deal with any piece of paper…Hooray!
If you have made it this far and have a somewhat-more-organized financial life, you deserve to give yourself a huge reward….treat yourself to something nice 🙂 and congratulate yourself for a job well-done! It is not easy to tackle “boring chores”, but it is so important. The time you spend now getting yourself organized will be repaid to you many times over in the future…you will lead a much more stress-free, happy, and zen-like existence!
If you’ve tackled your own financial paper nightmare either now or in the past, I would LOVE to hear about how you did it and whether you think it was “worth it”! (For me it definitely was!)
Tomorrow I’ll give you a break from all of this organization-mumbo-jumbo and we’ll get back to some cool money/investing stuff…
Thank you so much for reading (especially this week—I know organization is no one’s favorite topic, but it’s a necessity for a true kung fu life!) and thanks so much for all of your comments and questions!
Keep ’em coming…we’ll have a big QnA Friday this week!
To your financial success,
— Kung Fu Girl