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Five Steps to Organizing Your Finances

Do you know your net worth? Or how much you spend each month, and on what? Or how much you can expect from your pension plan or Social Security in retirement?

A no to most of these questions puts you with the majority of the population who have been too busy with life to get a handle on their finances.

Fortunately, there's a five-step action plan to help you take control of your money.

  1. Set up a financial filing system. Create a personalized filing system by labeling accordion file pockets with broad financial categories. Then label regular file folders with subcategories that fit your situation and file them into the accordion pockets. For example, create a Property & Casualty Insurance accordion file and fill it with a Vehicle Insurance regular file folder.
  2. Gather records. Look through your records to identify missing information. For example, you need an estimate of your Social Security retirement benefits. To request one, contact the Social Security Administration at 800-772-1213. Gather copies of your health, disability, life, homeowners, and vehicle insurance policies, and get a copy of your credit report. Contact the three national credit bureaus for information about how to request a copy of your credit report and how to correct any errors you find (Experian 888-397-3742, Equifax 800-685-1111, Trans Union 877-322-8228).
  3. Size up your situation. Add the estimated current value of all assets, including your home, car, personal property, savings, investments, and retirement accounts. Next, add all liabilities, including mortgage, credit card balances, and any other outstanding debt. Then subtract liabilities from assets to figure net worth. Then, make a list of income and expenses by reviewing paycheck stubs, checkbook register, and credit card statements from the past year. Finally, track spending for a month by saving all receipts or recording cash purchases in a notebook. A spending plan form or money management software program helps organize spending by category.
  4. Chart a course. Set financial goals--long-term and short-term--and figure how much money you'll need for each. Create a target saving and spending plan that meets needs using your list of income expenses. For a month or more, track actual spending to see how you're doing, making changes as necessary.

The Inside Scoop on Financial Tools

If you want to find the most useful personal finance tools you can trust, in a user-friendly format, ask the experts.
Rick Harper, director of housing and vice president of program services for Consumer Credit counseling Service of San Francisco, recommends the online IRS Withholding Calculator (http://www.irs.gov/Individuals/IRS-Withholding-Calculatorl) to help employees fill out their W-4 correctly. It's particularly useful for first-time home buyers.
Chris Bjorklund, independent consumer affairs consultant and Consumer Action board member, recommends www.ConsumerWorld.org, probably the largest consumer information Web site run by a nonprofit. You'll find consumer protection information, money-saving tips, news about recalls and special offers, and much more.
Gerri Detweiler, author of "The Ultimate Credit Handbook," recommends www.zilchworks.com  for anyone trying to pay off credit card debt, because it uses the principles of "credit card math" to let you customize your own debt reduction plan.
Suze Orman, author of several personal finance resources and host of her own national CNBC-TV show, calls www.savingforcollege.com  the best site for 529 (college savings) plans.
Ed Slott, certified public accountant, and called "America's IRA expert" by Mutual Funds Magazine, recommends "Cracking Your Retirement Nest Egg (Without Scrambling Your Finances)" because it hits the important points of retirement issues.
Eric Tyson, author of "Personal Finance for Dummies," recommends publisher Nolo Press (http://www.nolo.com/) for do-it-yourself law books, software, and forms.
Susan Keating, head of the National Foundation for Credit Counseling, believes the www.fanniemae.com and www.freddiemac.com Web sites are a great help for home buyers.

Managing Your Parents' Money

Like many adults, you could find yourself managing finances for the very people who taught you how to manage yours - Mom and Dad. Although the prospect of taking over your parents' finances may not be appealing, it may allow them to stay in their own homes longer and enjoy relative independence.

Approach your parents about taking over their finances with tact and diplomacy. By following a few simple steps, you can make the transition smooth and relatively painless for everyone involved.

Start by knowing where to find their financial documents so that you'll be better equipped to handle an emergency. Review wills, insurance policies, credit union records, and pension plans with your parents to ensure that their needs are spoken for. When the time comes to manage their money, you'll be familiar enough with their finances that there will be few surprises.

Simplify their record keeping with direct deposit of income and automated payment of regular bills through Hopewell Federal Credit Union.

Consult social service agencies dedicated to the well-being of older people. The Eldercare Locator can help you find such agencies in your area. It can be contacted by phone at 800-677-1116, or at the Web site at www.eldercare.gov.

When necessary, get involved in your parents' financial lives to prevent unscrupulous individuals and companies from taking advantage of them, and to help ensure their financial well-being into the future.