I’m excited. I just upgraded my personal finance organization system and, by far, it’s the most complete, accessible, secure system supporting my efforts to be a great steward of our financial resources.
I want everyone reading this blog post to know that I have personally utilized and reviewed many, many methods of organization over the years. My observation is that most people either lack an organized system or have something too complicated, costly and/or time consuming to serve them. I hope my sharing this inspires ideas for upgrading what you have supporting you.
My system is super-simple, super-accessible, super-secure and takes hardly any time or money to maintain. Sound interesting? Read on.
Here’s a summary of the system, organized into a handful of rules:
- Always maintain a single “Consolidated Balance Sheet,” updated at least annually, that is stored in a secure manual and secure cloud location (more on secure
manual and cloud solutions below). A simple spreadsheet is probably best. Yes, there are aggregation softwares and bookkeeping applications that automatically update values. Use them if you like, but frankly, I believe a simple spreadsheet you manually update semi-annually or annually is perfect. Use the format I recommend in my book Absolute Financial Freedom:
- Liquid Assets – Credit Card Liabilities = Net Liquid
- Semi-Liquid Assets – Loans = Net Semi-Liquid
- Personal Assets – Mortgages/Auto Loans = Net Personal
- Retirement Assets – Retirement Liabilities = Net Retirement
- Non-Liquid Assets – Non-Liquid/Business Loans = Net Non-Liquid
- Net Liquid + Net Semi-Liquid + Net Personal + Net Retirement + Net Non-Liquid = Net Worth
- Always maintain a single consolidated “Our Personal Finances” document that is stored in a secure manual and secure cloud location. Again, a spreadsheet is an ideal organizing tool for this. I’ve organized mine to explain precisely what we have in place and where to find what is needed. Here are my recommended categories for this robust document:
- 1-Pager on Where to Find What You Need
- Consolidated Financial Statement
- Professional/Consultant Directory (with note on how each is used)
- Banking/Online Bill Paying Summary
- Insurance Policy Summary (by category of insurance)
- Credit Card, Mortgage and/or Other Liability Account Summary
- Estate Plan Summary
- Co-Worker/Employee Directory
- Business Disaster Resistance & Rapid Recovery Plan (if you own a business)
- Social Security Benefit Statement
- Password Vault Information (for secure service that keeps your passwords organized)
- Private Safe/Bank Security Box Information
- Cloud Computing Summary (What Used, Usernames, etc.)
- Membership/Reward Account Summary
- Always maintain a manual “Confidential Financial Documents” file box in a fire and theft resistant safe (see image) at your home (preferred) or a bank “security box” vault. Believe it or not, one 18” x 18” plastic file box holding a couple dozen hanging folders (see image) can comfortably hold everything you need and fit inside a medium size fireproof safe or bank security box. Here’s a list of documents to have in this format:
- Financial Overview (Include plastic sleeves with print-out of above two bullet items)
- Investment Accounts (Include end of year copy of statement for each account)
- Insurance Policies (Policies and/or Declaration Sheets for all policies)
- Personal Property (Titles and/or other documents related to ownership of personal property)
- Private Business Ownership (Shares, Articles, and/or other documents related to private business ownership/investment real estate you are majority owner)
- Estate Plan (Wills, Power of Attorneys, Medical Directives, Trusts, etc.)
- Private Investments (Documents related to ownership of private investments/real estate you are a minority owner)
- Liabilities (Documents related to loans, mortgages, terms, etc.)
- Official Documents (Birth Certificates, Passports, Marriage, etc.)
- Family Documents (Elderly Parents Estate Documents, Children documents)
- Tax Returns (actual copy or summary of last seven years – rolling)
- Always maintain a secure “Cloud Vault” that is a digital version of all three items above. Janiczek Wealth Management clients have access to our secure Client Portal consisting of a Digital Vault precisely for this need. The sensitivity of the data and the
evolving cloud computing and secure data center industries (see SOC 2, SOC 3, SAS 70, etc. security auditing and certification standards) requires consumers to diligently review and select service providers who maintain strict security protocols. I would just suggest using those with the highest level of security, including text security code verification for all new devices attempting to access your account.
- Always utilize and maintain “Online Banking and Investment Account” access with automatic digital storage of statements, transactions, checks, and, ideally, invoices paid. This means all records of banking (cash flow) and investment (transaction/value) activity automatically stored at the secure data centers of your bank, bill paying service and investment account custodians. Since this is the data that changes most frequently and which could involve the most physical mail (if you do not opt out for printed/mailed copies), opting in for digital and out of physical copies saves an enormous amount of time and effort (from opening mail, filing, shredding, security, etc.). I have some great tips on how to streamline bill paying and spending monitoring and controls in minutes a month. This will be a topic for a future blog post.
While it does take a little time to set up the above organization system, once in place, it is extremely easy to maintain. If your finances are not yet organized in such a way, I highly recommend you dedicate the next quarter to putting the above together and then probably an hour or less a quarter thereafter to keep all in order. You will love it.