By Bill Pratt
5 May 2009

This article is part of our 52 week journey through Bill’s latest book, The Graduate’s Guide to Life and Money. Each week, a full excerpt from his book will be presented from beginning to end. To get your copy of his book, visit www.TheGraduatesGuide.com.

Last week we concluded our discussion of your paycheck. Now we start the journey of making plans for your life and assessing where you are now. We will start with how to get organized, what files to create, and the one place you should NEVER have your social security card.

You’ve probably heard the saying, “Nobody plans to fail, but they fail to plan,” so I promise I won’t mention it. If you set zero goals for yourself, that is exactly how many you will achieve. This is not about getting in touch with your inner self or anything, it is just common sense planning.

There are three basic questions to ask yourself in order to plan:

1. Where am I? You need to assess your current financial and life situations.
2. Where do I want to go? You should plan for major financial decisions such as retirement, as well as minor ones, such as vacation.
3. How do I want to get there? You have many options available. The more knowledge you have, the better you can make the decisions that will be right for you.

These three questions are essential to any type of planning. Just think of this plan as your financial road map (or your GPS navigator, if you prefer). If you were planning a trip, you obviously need to know your starting point. A trip to the Grand Canyon is completely different if you were coming from Washington, D.C. as opposed to Denver, Colorado. You also need to know where you are going; otherwise you won’t get there. Finally, you have to plot your course. Do you take the quickest route, the shortest route, or the scenic route? That’s what we are going to explore.

Where Am I Now?

The best way to find out where you are is to ask some serious questions. Are you married or single? Are you planning to have children in the near future? Do you rent, own, or live with your parents? Are you in a stable job? Do you like it? These are the types of questions you need to ask in order to figure where you are in your personal and financial life.

Getting Organized

“I’m sure I didn’t throw it away. It has to be around here somewhere…” Does that sound familiar? I know it’s not the most fun after-work activity, but it is important we keep our most important papers safe. Okay, we also have to be able to find them. I know plenty of people that have their mortgage deed in a safe place, somewhere in the bedroom… or was that in the attic? In an emergency situation (need to file a claim on your car insurance) or during a dispute (“I know my credit card balance wasn’t that high!”) you need to be able to easily find your needed documents.
The easiest way to keep all of your important papers together and readily available is to organize them in a file cabinet. Just get several manila folders and label them according to their category. Below is a list of common files to keep:

• Bank Account
• Auto
• Insurance
• Retirement
• Other Investments
• Pay Stubs
• House / Rent
• Taxes • Warranties
• Utilities
• Phone
• Credit Card(s)
• Loan(s)
• Pet(s)
• School/Child Care

Another option is to get a three ring binder with pocket inserts and keep your documents in there. That way you can move all of your files together if you need them.

Once you create your files, you may wonder how long to keep everything. Eventually the folders will get full and then you’ll stop using them, and then you can’t find anything… As a general rule, you should keep everything for one full year. Once you get a year-end statement that agrees with your records, throw out the monthly statements.  Otherwise, always have the prior 12 months handy. You should keep your tax records for seven years, since the IRS can still come after you for up to seven years. Any records for your home (if you own one) should be kept until you sell it and file your taxes. When you pay off your car loan, you will receive a document that says so. Keep it until you sell your car. You should also have at least 12 months worth of pay stubs, even if you have your year-end statement. Many banks and mortgage companies are interested in seeing a few of the actual pay stubs.

In a safer location you should keep the following:
• Birth Certificates
• Passport
• Social Security Card (never carry this in your wallet)
• Marriage certificate
• Adoption papers
• Wills/Trust

Basically, anything that could seriously cause you hardship should it be lost, stolen, or destroyed, should be kept in a fire proof safe at home or in a safety deposit box. One exception is that wills should not be kept in a safety deposit box, because the person who dies may be the only one who has access to that box. It is better to keep a copy of your will with your attorney or in a fireproof safe at home. You can also keep a copy of it in the safety deposit box or even with your other important files.

Next week we will cover how to organize your regular bills, discuss key strategies for staying organized, and look at ways to avoid identity theft.

Bill Pratt is a former credit card executive turned student-advocate. He is the author of Extra Credit: The 7 Things Every College Student Needs to Know About Credit Debt & Ca$h and The Graduate’s Guide to Life and Money. Bill speaks at colleges to educate and entertain students about real-life issues in money, leadership, and success. His goal is to help students succeed personally and financially so they can improve the lives of those around them. You can learn more at www.ExtraCreditBook.com or www.TheGraduatesGuide.com.