The new year is approaching, which means goal-oriented people are already thinking about their resolutions for 2014. Throughout the country, in great numbers, consumers will soon be joining gyms, buying weight-loss books and swearing off vices.
Many people will also attempt to manage their money better in the new year. Specifically, to spend less and save more. So if you'd like 2014 to be a better year for your pocketbook than 2013, don't wait until Dec. 31 to start organizing your financial papers. Here are some strategies to get you rolling.
The basics. If you're going to get your finances in order, it's best to do it when you have some genuine distraction-free time, unless you're someone who thrives in chaos. So send everyone away, don't check your email, turn off your phone, clean your desk and locate your financial documents.
[See: 50 Smart Money Moves to Make Now.]
Budget. If you have a budget but haven't looked at it for a while, now is a good time to take another gander. Maybe you rarely use Netflix, Hulu Plus, HBO, Showtime or another entertainment subscription service, and it's time to ditch one or all of them. Maybe it's time to trade cable for satellite, or vice versa. A good rule of thumb for splitting up your budget goes as follows, according to Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network, a national company that aims to help consumers get out of deep debt:
• Home expenses: 35 percent
• Transportation expenses: 15 percent
• Paying off debt, assuming you have any: No more than 15 percent
• Savings: 10 percent
• Miscellaneous: 25 percent
"These will vary by household," Gallegos says. "Someone who lives in the heart of San Francisco or Manhattan, for instance, may have a higher percent for the home category, but a lower allocation for transportation. An individual who lives in an outlying suburb might have a lower home percent, but higher transportation expenses if he or she commutes."
And as you would expect, there are a slew of websites and apps to help you organize your finances if you think better digitally than on paper (chances are, many of your statements come to you via email, anyway). Some popular options include mint.com, manilla.com and feedthepig.com.
If you're near retirement or taking the long view in your budget, check out retirement calculators. Some that have won awards and include a variety of features are BlackRock CoRI, the Vanguard Retirement Income Calculator, the MarketWatch Retirement Planner and T. Rowe Price's Retirement Income Calculator.
What to keep/what to junk. In the process of getting organized, you'll likely be parting with a lot of paper – but don't throw it all away.
Obviously, no formula fits everyone's situation. But the Internal Revenue Service suggests retaining tax records for at least seven years, and some tax experts suggest hanging onto your actual tax returns forever and just shredding or deleting the receipts and paperwork associated with returns older than seven years. When it comes to your home, however, you should keep any and all records, no matter how yellow the documents.
But feel safe throwing out receipts, including from the ATM and your credit card, as well as pay stubs and monthly bills if you no longer have use for them (i.e., you've checked them against your monthly statement).
Taxes. You can't claim to be financially organized if you don't have your taxes organized. Technically, nobody should be organizing their taxes at the end of the year, says Rick Davis, professor of accounting at Susquehanna University in Selinsgrove, Pa. Tax-related documents, like receipts or the mileage log you keep for deductions, should be maintained and organized every month, he says.
But if you're not in the mood for a lecture and just want to know how to get your act together now, Davis advises: "You should have a separate tax folder, divided into files by types of relevant items: income, charitable contributions, interest payments, tax payments, education expenses, et cetera."