As I talk with folks about their finances I’m often surprised at how many of them don’t really know what they have. While I certainly didn’t expect everyone to be as “into” finances as I am, I sorta always assumed that everyone kept track of their finances in some shape or form. But what I find is that many people have little or no organization scheme for their finances and, often, they don’t even know where all of their accounts are, what the balances are, or what bills they regularly pay. Needless to say, this makes any type of financial “planning” on their part much more difficult.
So I thought in this post I would briefly describe at a high level how we organize and track our finances. To be clear, there is no one “right” way to do this, and I’m not suggesting the way we are doing it is the “best” way for everyone, but I’m hopeful it might give some folks some ideas for how to start if they are currently struggling with how to do this.
We use Quicken to track our transactions but, if we were starting today, I would probably use Personal Capital and/or Mint. But we’ve been using Quicken since before those existed, and we have 30+ years of data, so I just stick with it. Honestly, these days we don’t really need to track our transactions any more. Our situation is stable enough that we could probably just stop doing this and be fine. But when we were younger, this was a great way to keep our “checkbook”, track our mortgage, track our spending, and keep track of our net worth. All of those things are better done these days with newer tools like Personal Capital or Mint, and it’s really the first step to getting organized. (Tracking your spending is particularly important.)
Overall Financial Information
I think it’s helpful to have a document that makes it easy for everyone in your household to “find” everything related to your finances. For this, we use a Google Doc (example, with our specific info removed). This includes contact information, account numbers, balances (or typical bill amount for bills), and brief descriptions where necessary that summarize how we are using the accounts or particular strategies we have in mind.
In our household, I’m the one who deals with finances most of the time. It’s probably pretty common for one person in the family to do this, but it’s also really important that the other people in the family – especially your partner if you have one – are kept in the loop. I also feel that if you have children they should also be informed. When they are younger, it will be much more of a general discussion, but as they get older you can add in more and more details. In our family (our daughter is now 22), at least once a year we go over this google doc and discuss any changes. This is helpful to make sure we are all still on the same page in terms of our values and goals and, critically, serves as a resource should something happen to me. For way too many families, if the financial lead were to die or become incapacitated, it would be very, very difficult for the family to figure everything out. (The obvious add on here is make sure you have a will, power of attorney, and health care directive for each adult in your family as well.)
We use a Google Sheet to track our investment accounts (example, with our personal info removed). This provides a nice overview for planning purposes. We also use a “projection” spreadsheet (which I have not included) that attempts to project how those investments will grow in the future based on various assumptions.
If you have steady income and no surprises, you probably don’t need this one. But if your income varies, or if you have side hustles, it can be helpful to do some basic tax planning to make sure you don’t end up owing the IRS a penalty at tax time. We again use a Google Sheet for this (example, with our personal info removed). Since I have some income from self-employment (teaching classes and book sales), this is a way for me to track that and then adjust the tax withholding on our pension checks so that our withholding fairly closely matches what we will owe in taxes each year.
Note that the formulas in this spreadsheet are only configured to work if your marginal federal tax rate is 12% or 22%, but would be easy enough to modify if you were above or below that. The formula for state taxes is for Colorado.
What Do You Need?
While not everyone needs all four of these (and some people may need even more), I’d highly encourage you to take a few minutes and think about your situation and what type of organization scheme might help you out. Then actually take the time to create those resources. And then, critically, make sure you share that with your partner and family if you have one. Without having some kind of organization and tracking, it will be very difficult to achieve any financial goals you have and live a financial life that aligns with your values.