Getting Your Finances Back on Track

Many of us have good intentions to get our “financial house in order” and take control of our finances rather than letting them control us.  Daunting as that may be, here are some practical suggestions excerpted from a CBS news story (www.cbsnews.com) about David Bach, best-selling author of “Start Over, Finish Rich,” to get your finances organized for 2010 and help save you some money at the same time.

Asked how much money people are losing by being disorganized with their bills and receipts, Bach said, “The key is to start by ‘finding your money’ – getting organized is where you start. People can lose thousands of dollars a year when they don’t know where their money is. Just losing itemized deduction alone because you didn’t keep you records can cost you thousands of dollars. Not keeping your home improvement records can cost you tens of thousands when you sell your home.”

Bach said the biggest mistake people make is not organizing their statements, stuffing all into a drawer without any system. Asked why, he said, “Most people don’t know how to ‘get organized financially.’ They were not trained, they don’t have a system. I have a system. It has helped thousands of people. It’s easy and you can do it in an hour.”

To get organized, Bach says to shred it and forget it – that is, shred and throw away old bills and statements. “You can get rid of most old statements. First clean out everything that is not tax related for 2009. Old warranties, old annual reports, newsletters etc. Out with the old and in with the new,” he explained.

But what if you get audited? How far back should be keep financial documents?

“The IRS recommends you keep records for three years, and as far back as seven. But old tax documents can be filed in the garage or storage. They don’t need to stay in your home office,” Bach explained,

His next step is called “find it and file it.”

“My start-over file folder box has 14 folders. It’s a system in a box, that you can build in less than an hour to organize everything in your financial life,” Bach explained.

The folders are: Tax Returns, Retirement Accounts, Social Security, Investment Accounts, Savings and Checking Accounts, Household Accounts, Credit Card Debt, DOLP Worksheet, Credit Scores, Other Liabilities, Insurance, Family Will and Trusts, Children’s Accounts, Latte Factor.

Bach said, “You can completely automate your financial life in less than an hour, if you do it correctly.”

“The secret to ‘finishing rich’ is to have an ‘automatic’ financial life,” he said. “When you earn a paycheck, you automatically have you retirement account, emergency account, and other savings accounts funded. In ‘Start Over, Finish Rich’ I go as far as teaching you exactly how to automate your entire financial life into seven categories and that includes paying your bills.”

Bach said that part of getting organized is fixing and protecting your credit score. “Everyone should start the year by pulling their credit score for free.  You want to check it for mistakes, and get those mistakes fixed in January. Having mistakes on your credit report can cost you thousands of dollars a year in higher interest,” he explained.

(TRIP recommends that you contact one of our housing counselors to pull and review your credit report with you.  Not all sites provide free reports, despite their claims.  And knowing how to correct inaccurate information is key to controlling your financial situation.)


And Bach recommended to “recommit to wealth.”

“All recessions lead to recoveries,” Bach said. “We are already in the beginning stages of a massive recovery now. The stock and bond markets have posted staggering gains in 2009. Home prices are stabilizing and earnings are improving. You cannot afford to stay down and miss this next economic boom. This is your year to ‘Start Over, Finish Rich’ and get your finances back on track.”

Visit David Bach’s Web site, FinishRich.com.