Rethinking Wealth & Organizing For Financial Wellness

Many years ago I read, “The Millionaire Next Door,” by Dr. Thomas J. Stanley & Dr. William D. Danko, and it opened my eyes to the difference between the people who appear rich and those that actually have a net worth of one million dollars or more. It obliterated my previous assumptions that people with expensive homes, cars or other material goods were rich. A pivotal point for me in the book is when the researchers host a sort-of cocktail party to entice people that are millionaires to participate in the study.  They provided champagne and fancy hors d’oeuvres, and they were dumbfounded when the study participants didn’t want them. They wanted Budweiser. The authors’ research revealed that millionaires were more likely to be unassuming. 80% of them are first generation millionaires and self-made. They were people who were frugal with their money. And frugal didn’t necessarily mean cheap.  While I don’t anticipate ever being a millionaire, I think it’s useful to learn from the people who are.

With the current political and financial climate likely to change, I’m considering how increasing interests rates and changes to health care insurance options may affect me personally. Now more than ever, I want to make sure I maintain an emergency fund, live below my means, and save for the future.  Being financially stable and prepared for emergencies depends on having a good organization system.  It doesn’t require making gobs of money, although that doesn’t hurt. 

Organizing all of the financial paperwork that an adult life requires can be a source of stress and chaos.  It can also get expensive when records can’t be found or bill due dates are missed. Five years ago, I read and followed the tasks outlined in “One Year to an Organized Financial Life,” by Regina Leeds with Russell Wild. By the end of week four, my home financial documents were an absolute joy to behold. When I moved a few years ago and the system I created didn’t transfer to my new home, I turned to this book again. For the eight pages on how to create a financial file system alone, this book is worth keeping in my home library.  That said, my system uses the basic points from the book and has evolved to address some additional goals I have.

I want a filing system that is aesthetically pleasing, located where I’ll use it, and works with my lifestyle. The flow of paper needs to be consistent and no more complex than necessary. I want all relevant financial information in one place when I need to do taxes, and I want it to help me stay focused on my financial goals.

The components I use that I haven’t seen in other financial organization guides include a shallow, trifold document organization method that doesn’t use file folders, a process for managing receipts that works for me, and an embedded financial planning and tracking system.

Financial Drawer Organization Hub:

My previous system used a two-drawer file cabinet with hanging files, but I prefer to be able to easily see my bills and other documents somewhat like an open shelving system.  With my current system, I can see more at a glance. Documents are easy to file, easy to view and access, and easy to maintain.

Using a pull-out shelf in a cabinet with a glass front door allows me to see all of my finances at a glance. This would be easily adaptable to a shallow kitchen or dresser drawer. The cabinet is located next to the kitchen and is easy to access when I walk in the door, unload my bags and sort through mail.

Using 4’x6” index card dividers is perfect for organizing bills that are folded to standard envelope height. A 10.5”x7” drawer organizer box holds bills and standard paper folded in thirds like it was designed for this purpose. The box also makes the files mobile if you need to take them to your table or desk for any reason.

Taming Receipt Chaos:

Receipts have plagued me in my adult life given it seems dealing with them should be so easy. Sadly, they seem to congregate in places that weren’t organized or useful. I felt like I should keep them all, but I didn’t differentiate between types of receipts or have a defined place for them.  Often they were just stuffed in a folder.

Now when I get home, I immediately move receipts from my wallet or shopping bag to one of two sections in my filing system. For purchases like gas, food, entertainment, restaurants and ATM transactions, I put those in the “Check & Toss Receipts” section. These are receipts that I only need to keep long enough to confirm that the charge amount is correct on my credit card or checking account. I can check this online as needed or when I get my monthly statement.

For purchases of durable goods, auto maintenance & repair, home maintenance & repair, out-of-pocket medical expenses or tax deductible items, I put them in the “Receipts to Keep” section. I have sub-sections for each of these types of purchases.

For expenses, online returns or receipts with paperwork to be submitted for reimbursement, I’ll temporarily file them under “Reimbursements Pending” in the “Receipts” section. When reimbursement is complete, these can move to “Receipts to Keep” if appropriate or tossed. You may also want to move this documentation to “Other Deposits” if it’s deposited to a bank account and not just a credit card transaction.

Financial Planning & Tracking:

The financial planning and tracking section of my filing system helps me know at a glance which bills have been paid and what still needs to be paid. This is an absolute must for me when I’m leaving town and need to take care of bills before I leave. It’s also extremely helpful to plan ahead for expenses that occur infrequently.

I created a checklist (located at the end of this post) that covers everything I want including what day each payment is due and when I need to initiate the payment with online banking. Bills that are paid automatically are grayed out so that I know they exist but I don’t need to manually make a payment.  I also include sections for my income and savings that gets siphoned off from my paycheck to a separate savings account.  If this is more than you need, you could create a simple list of your bills with boxes to check off for each month of the year.

Filing Drawer Categories and Subcategories:

1.   Receipts

a.  Check and Toss Receipts: These are receipts that I only need to keep long enough to confirm that the charge amount is correct on my credit card or checking account. I can check this online as needed or when I get my monthly statement. Examples of these types of purchases include gas, food, entertainment, restaurants, and ATM transactions.

b.  Receipts to Keep

                i.   Auto Maintenance & Repair

                ii.  Home Maintenance & Repair

                iii. Out of Pocket Medical Expenses

                iv.  Other Equipment or Durable Goods

c.   Receipts for pending reimbursement: Temporarily file papers related to online returns or receipts and paperwork to be submitted for reimbursement. These can move to Receipts to Keep if appropriate or tossed when reimbursement is complete. You may also want to move this to Other Deposits if it’s deposited to a bank account and not just a credit card transaction.

2.   Financial Planning & Tracking

a.  Bill Tracking: I created a checklist below that covers everything I want including what day each payment is due and when I need to initiate the payment with online banking. You could create a simple list of your bills with boxes to check off for each month of the year.

b.  Budget

c.  Credit Score

d.  Medical Bill Tracking: Check out my blog post, Creating Some Order in the Medical Billing Chaos, that details how to track medical bills and insurance payments.

e.  Retirement Planning

3.   Banking: checking, savings or credit union accounts

4.   Credit cards

5.   Debt: mortgage, car loan, other loans

6.   Deposits: pay stubs, other gifts, income or reimbursements

7.   Household bills: home utilities, internet, phone(s)

8.   Insurance: life, auto, health insurance policies and statements

9.   Investments: include investment accounts and any retirement benefit statements through work or Social Security.

10. Taxes: any taxes owed throughout the year including property tax and federal estimated tax payments and any expenses that are tax deductible.

11. Banking supplies: checks, deposit slips and envelopes

I relish having a system that keeps me organized and furthers my financial goals.  I want it to be easy to use and enjoyable to maintain. I don’t want any extra steps that may discourage me from taking care of things immediately when I get home, and this system works great for me.  I’ve been using it for quite a while now and am really happy with it.