Organize Your Finances

The better organized you are about your finances, the less you have to think about money, the more time you have to live your life. And that's what it's all about.

Financial clutter always takes the form of paper. Let's dive into it.

File cabinets are full of papers you will never look at again. I'm convinced that 80 percent of what goes into a filing cabinet never sees the light of day again. It's incredibly difficult to throw away files. After all, at some point in time you thought this piece of paper was so valuable that it deserved to be filed. And now you're going to just...throw it away? The answer is, yes. That's exactly what you're going to do—on a regular basis comb through your files and discard those once indispensable, now completely unnecessary pieces of paper.

I dealt a lot with paperwork and filing in It's All Too Much: An Easy Plan for Living a Richer Life with Less Stuff but it's probably worth repeating here some of those broad and fairly conservative guidelines for managing your bills and financial records for tax season and audits. My official disclaimer is that you shouldn't take my word for it and should check with your own accountant or financial adviser to verify that this information is up-to-date and accurate for your state and situation.

If you want to check the official word on this, read what Uncle Sam has to say at the website of the Internal Revenue Service. Download Publication No. 552 at IRS.gov  for complete details of what to keep and what you can let go of to keep the tax man happy.

Overstuffed files create stress and disorganization. That's bad enough. But unopened mail always creates money problems. Those sealed envelopes contain bills that increase as they go unpaid. They contain reminders of the deposit due to hold your child's place in school. They hold notices of changes in credit card rates. They hold insurance reimbursement checks that don't earn you interest until they're deposited.

The longer you ignore envelopes, the more they build up. Unpaid bills get sent again so you have twice the work to figure out how much you owe. And the pile sits there, on the table in the entrance hall or, worse, spread across the dining room table, a constant reminder to you (and your family, if you have one) that life isn't secure. Things aren't under control. Disaster looms. Remember what I said at the beginning of this chapter? No more paperwork procrastination. That's where I wanted you to start and it's where I'll end. Start with the clutter. Clear it out, clarify your goals, and make the life you want a reality. Are you ready to go?

Here's a quick cheat sheet for tackling your home office and financial clutter:

• Create a vision for the space where you handle your finances. There should be an inbox for bills to be paid and whatever supplies you need to pay them (computer or checkbook, envelopes, and stamps).
• Overcome obstacles that prevent you from doing paperwork. Come clean with yourself and your partner and prepare to move forward.
• Commit time, even if it's only twenty minutes during which you sort and shred every day. Just make sure you prioritize your current paperwork. Handle new papers first, then spend leftover time dealing with the old.
• Communicate with your partner about your shared vision for managing your finances. If you aren't both committed, you won't succeed.
• Set boundaries. Live within your means. If you tend to overspend, give yourself a twenty-four-hour cooling-off period before committing to a purchase.
• Make changes. Only by changing the role stuff plays in your life will you be able to stop buying more things, let go of the clutter, and find a financial balance that makes sense for the life you want.
• Live in the present, but set aside funds for the future as soon as a paycheck comes in so you can live with the confidence that you'll continue to enjoy life.
• Face fears. Owning up to your money troubles is the first step toward solving them. If you ignore debt, it gets worse fast.
• Celebrate successes. As you simplify your finances, you will feel more relaxed and secure. You work hard for your money. Enjoy knowing that you're making the most of it.