Financial Routines for Financial Success

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™


There’s a different routine in my house these days. I’m writing this on the first day of school for my younger two boys and over the past few weeks my older two sons have gone to their respective colleges (VCU in Richmond and MassArt in Boston). The lazy days of summer are over and the kids are going to bed early and getting up at the crack of dawn. And with the older boys out of the house, there is no more having to wait up until they’re safely in the driveway after a night out with friends. It’s great!

For many families, the beginning of the school year marks the start of new routines -- packing lunches in the morning, extra-curricular activities in the afternoon and homework at night. At dinner tonight, our family talked about the day’s events and about the changes to our schedules and routines. We spoke about how success in the classroom often starts with having a good attitude toward school. And this got me thinking about personal finance and how simple changes in one’s attitude and routine can often have a profound effect.



Eat Your Brocolli



A lot of people view personal finance as complete drudgery, a task to be avoided in favor of … pretty much anything else in life. For folks who keep that negative attitude, personal finance success will be very difficult. Instead, we should view it as a personal challenge – just like eating our broccoli. Who knows, if you go into it with a positive attitude, maybe you’ll find it isn’t that bad after all. It took me a long time, but I finally realized broccoli doesn't taste so bad; in fact, I think it's delicious.

 

Perhaps you’ve got the equivalent to cold broccoli sitting on the corner of your empty dinner plate. I can’t begin to tell you how many people I meet who have sizable amounts of money saved up in their old company’s 401k plan, but who never really pay any attention to the portfolio; it just sits there neglected. Simalarly, you'd be surprised at how many times bank CDs get automatically rolled over at ridiculously low interest rates just because individuals don’t take the time to explore their options. If you’re ready to start a new financial routine, you need to start with a checkup.  

Create Habits to Handle Personal Finance

Take a moment and think about how you currently handle your personal finances. Do you have a system for paying your bills on time? Letting a bill sit on your desk even one day too long can cost you in hefty late payments or lost discounts. How about your investments? Do you check your portfolio regularly and know what you’re investing in? What about the way you budget for vacations or big ticket purchases or expenses? After some self-examination you should be able to determine whether your existing financial habits are good ones or bad ones in need of change.

The goal, of course, is to create good financial routines which become habits that are burned into your subconscious – things you do because you’ve trained your mind to do them automatically. It is financial routines like this that play a huge role in financial success.



This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com



How Long to Keep Financial Records

By Steve Davis, CERTIFIED FINANCIAL PLANNER ™

A client recently called me looking for guidance on how long to keep her financial records. Until this point, she used what I call the Hotel California method of record keeping. You’ll remember the famous Eagles song concludes with the lyrics, “You can checkout anytime you want, but you can never leave.” For my client, once a paper was filed, it could never leave its manila folder stuffed inside a desk drawer. As a result, her filing cabinets were bursting at the seams with bank statements, receipts, bills and other “important papers.” So, if your recent tax return is still sitting atop your desk because there’s no more room in your filing cabinets, this article is for you.

Keys to Success

Knowing what records to keep can sometimes be as easy as knowing why you need to keep them. In general, paperwork is kept for death, taxes and proof of ownership. For example, your wills and life insurance policies are filed so they can be found when you’re no longer around. Tax returns and supporting documents are kept in case you’re ever audited by the IRS. Receipts and warranties for big purchase items should be filed until you can no longer return or exchange the item, or until the warranty expires.

So if your filing cabinets are chocker-block full, here are some general guidelines for how long you should keep your documents.


What to Keep Forever

• In Case of Emergency File (a list of where your important papers, files and passwords can be located, along with the names of whom to call for more information).

• Birth Certificates, Marriage Licenses, Adoption Papers, Divorce Decrees, Death Certificates

• Wills, Trusts, Power of Attorney, Health Care Proxy, Gift Tax Returns, Estate Planning Documents

• Record of Paid Mortgages, Student Loans, Car Loans, etc.

• Record of nondeductible traditional IRA contributions or conversions to Roth IRAs (IRS Form 8606)



What to Keep While Active

• Insurance Policies (life, disability, homeowners, long-term care, etc)

• Annual Investment Statements (you can toss the monthly and quarterly ones)

• Records of Pension Plan

• Deed to your home, Stock Certificates, Title to your car

• Receipts and Warranties for major purchases

• Home Improvement Records (for calculating the gain or loss when home is sold)

• Contracts

• Passport



What to Keep for 7 Years

• Tax Returns and supporting documents (some CPAs counsel to keep these forever). See Publication 552 for IRS recordkeeping guidelines (www.IRS.gov)

• Bank Statements, Cancelled Checks, Check Registers



What to Keep for 3 Years

• Household Bills

• Credit Card Statements

• Paycheck Stubs (keep just your year-end stub if you worked for the same employer all year)



What to Keep for 1 Month

• ATM Receipts (until reconciled with monthly bank statement)

• Sales Receipts (until reconciled with credit card statements, or for warranty)



Protect Yourself by Shredding

Now that you’ve identified what is important to keep and what is just taking up space, you’re ready to purge the stuff that has no importance. Before sending these papers to the trash, remember to protect yourself from identity theft by shredding everything that has your social security number or account information. A great way to do this is by supporting the non-profit Mansfield Shredding Center on Main Street in downtown Mansfield. Since 2008, Mansfield Shredding has been providing secure, confidential and compliant document destruction to Mansfield and surrounding communities, while also creating jobs for disabled adults.


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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.




This article was written by Steve Davis and appeared in the column "Talking with Davis about Money Matters" found at http://mansfield-ma.patch.com/articles/how-long-to-keep-financial-records