Financial Adult
October 17, 2012 6:58 AM   Subscribe

Although I'm a highly educated woman in my late thirties, when it comes to money I'm basically a fourth grader. Tell me how you managed to be a financial grown up.

I was married for most of my adult life and my ex-husband handled all of our finances. I really need someone (probably in book form) to tell me what to keep in a file cabinet, what to keep up with for tax purposes, and basically anything else I should be keeping track of and, most importantly, WHERE I should keep track of these things. I own a house and a car, have credit card debt, and school loans. I'm making dents in the debt (paying more than the minimum every two weeks) but the idea of doing my 2012 taxes is freaking me out more than anything. I know I have money going towards retirement, but I'm uncertain as to how to understand where it is and the ramifications of where my money is going.

Also, I'd really like to see all my financial business in one place but I don't know what to use in order to get the big picture. I have files all over the house in strange places and the idea of going through these baskets and bins is giving me anxiety attacks. I need a plan of some sort to help me figure out how to conquer all of this. What I really wish I could do is see someone's office space and get a feel for what they're keeping track of and why. Sort of like that blog where people show all the hipster stuff they carry with them.

Books and websites are great. Bonus points for those who tell me how they went from 10 years old to 38 in financial terms.
posted by anonymous to Work & Money (22 answers total) 59 users marked this as a favorite
Sign up for Mint to keep track of card and check expenditure, and track every cash-penny you spend one way or another (keeping a notebook, saving receipts, using an app, whatever) and then enter it into Mint as well. You'll be able to see exactly what you spend money on, how much you spend, and once you get your head around those numbers, you'll be able to make sound financial decisions. This isn't necessarily rocket surgery -- it can honestly be as easy as "holy shit I spend how much on takeout a month? I gotta cut that shit out" and then cutting that shit out.

If you don't know what you are doing with your taxes, pay someone to do your taxes. Ask your friends for a good and reasonably-priced accountant (not just Cousin Steve who owns a copy of Turbo Tax.) Don't go to H&R Block or whatever, as they tend to hire seasonal tax preparers that aren't actual accountants. Get someone who does this for a living; they'll be able to either maximize your return or minimize the amount you have to pay. Unless you're making next-to-nothing, filing taxes hamhandedly will cost you money in the long run. If you need to file an extension to find an accountant, file an extension. Around January, you should be receiving tax documents (W-4s and 1099s) from, at least: your job, your loans (mortgage, school, etc.) and your school. There's probably some other I'm missing, but the accountant will talk to you about where your money goes and be able to tell you what they need to see. This is why you want a professional accountant.

What is in these files of yours? Old bills? Loan statements? At the very least you can start, one pile at a time maybe on lazy Sunday or something, sorting it out into folders. One folder for bills, one folder for loans, one folder for whatever it is that you have enough of to put in a folder.
posted by griphus at 7:11 AM on October 17, 2012 [2 favorites]

(If you have a smartphone, I asked a question about keeping track of cash spending with an App that may help.)
posted by griphus at 7:13 AM on October 17, 2012

It's called "getting an accountant/financial planner."

Could you figure this stuff out on your own? Yeah, probably. You're a decently smart person who's managed to get a job, buy a house, borrow and repay money, etc. You can do this.

But do you want to do this? Hell no! I know I don't, and I'm a lawyer. I have many things I'd much rather spend my time doing than figuring out the byzantine tax code and its interaction with benefits, retirement savings, business deductions, charitable contributions, and my monthly budget. So last year I hired an accountant and financial planner. I took all of my receipts and W-2/1099 forms to them and a few weeks later they gave me a 1040 to sign. Easy! I could have filled all that out on my own, but (1) I was not terribly confident that I'd do it properly, and (2) that there's some tedious f*cking shit. So instead of spending probably two Saturdays on the problem I spent about fifteen minutes. Dropped off the file on the way to work, and hey, done. Cost me $300, but it was some of the best $300 I'd ever spent. Not only do I know that I'm not going to get fined by the IRS for failure to pay taxes they think I owe, but I didn't have to spend two days messing with it.

Same deal for figuring out retirement savings and stuff. I just got married, and my wife and I need to figure out how to best contribute to our various retirement plans now that we've got the income to actually start doing that. Plus we need to figure how to roll over her 401k from her last job, what's going to happen to that money, whether we should dump a bunch into my brand new 401k for this year, etc. Can we spend all weekend doing this? Yeah, we can. We've both got professional degrees, and I'm a lawyer. But man, why? We're not fully unpacked from the honeymoon, our garage is full of boxes, and we've got about 100 thank you notes to write. So I'm calling my financial planner to set up an appointment to tell them what our situation is--and probably have him tell us stuff about our situation that we didn't even know!--and let them crunch the numbers and tell us what to do.

Short version: grownups, provided they can afford to do so, know when to pay other people to do stuff for them. This is probably one of those times.
posted by valkyryn at 7:16 AM on October 17, 2012 [3 favorites]

W-2s, yes, not W-4s.
posted by griphus at 7:17 AM on October 17, 2012

Nthing get a CPA and financial planner. In the meantime, can you get a friend to come over and help you go through your files? Just getting them organized/in one place can help with the anxiety. Heck, drink wine while you do this! The general rule of thumb is to keep tax documents (w-2s, 1099s, etc) for 7 years. If credit card statements are available online, no need to keep the paper copies, shred 'em.
And don't be afraid to ask your CPA/financial planner exactly what you should be keeping/how long!
posted by csox at 7:25 AM on October 17, 2012

Suze Orman's book, Women and Money, is pretty much geared towards someone in your situation.

That's not to say that the above advice about getting a financial planner and an accountant isn't good advice. But in the meantime, I think you might enjoy the book for what it is: a crash course in everything you probably-should-but-don't-quite-understand about finances. The premise of the book is that smart, educated and otherwise fully-empowered women have been sticking their heads in the sand when it comes to financial concerns, and let's not do that anymore, so here's what you need to know. I found it helpful.
posted by terilou at 7:34 AM on October 17, 2012 [1 favorite]

If you don't earn a lot of money, if you don't own stocks and other such investments, then you don't need an accountant.

Get a plastic file box at your local office supply store and get hanging folders to fit and sort by the following main categories:

Car: If you're self-employed and you use your car for work, then you need to keep records for your car mileage. Otherwise just keep receipts for repairs, tires, and stuff like that for warranties. And keep receipts for excise tax payments on your car if your state has them.

House: Your mortgage interest is important, but your bank will give you a record of that at the end of the year. If you put in things like insulation, upgraded insulated windows, Energy Star appliances then you might qualify for a tax break. Keep all of those records. Also, any major repairs, like a new roof, an addition, whatever, keep those receipts for when you sell the house as well as for warranty. Also keep a record of taxes paid on house, often this is in your payment to the bank.

Credit card debt: doesn't count on your taxes, but you need a folder for this to keep track.

Student loan: interest does count. They'll give you a statement at the end of the year.

IRAs: keep a file for these if you have any.

Medical Expenses: If you have a lot of these that insurance doesn't pay you might be able to get a tax break for them.

W2: A file for them.

Previous years' taxes: whatever you submitted to IRS and State.

Then when tax season rolls around just use online turbotax, it really, really is pretty simple.
posted by mareli at 7:35 AM on October 17, 2012 [7 favorites]

Also a woman in my mid-30s here. n'thing Mint to organize the basics with. Beyond that, I became financially literate by diving into the world of personal finance blogs and podcasts about three years ago, which became a bit of an obsession for awhile. There are tons of them out there but I would primarily reccommend Ramit Sethi's book "I Will Teach You To Be Rich" which is modern, up-to-date, focuses on automation and "big wins" and ignores silly advice like "cutting out a daily latte." He has a lot of smart ideas about psychology and money, and has made managing my personal finances a pleasure, not a chore.

Also, a wonderful suggestion from The New York Times's Ron Lieber is to take a "Personal Finance Day" to tackle some basic tasks that will set you on the right path.

Both of them have some good advice that can get you on track. Now that I feel everything is properly sorted and automated, I feel ready to talk to a CPA and financial planner and make even bigger plans for my financial future now.
posted by amoeba at 8:09 AM on October 17, 2012 [1 favorite]

I also use, though I've had a hard time with some of their "Goal" setting functions not seeming to work for me.

I'd recommend The Simple Dollar for good basics.

Take a look on the right hand side for a list of his "14 Money Rules"
posted by Calicatt at 8:13 AM on October 17, 2012 [1 favorite]

I went from a 10-yr old perspective to an appropriate mid-30s perspective on managing my money and how to have an adult financial life by taking Dave Ramsey's Financial Peace University class. Now I will tell you up front that Dave Ramsey markets himself as a "Christian" financial educator, so his classes are often given through local churches and do have "Biblical" overtones. As a secular person who was raised Lutheran, I did not find this problematic, but your persepective may be different. Regardless of the churchy slant, his financial education program is *excellent* - perfect for teaching you the basics about what's important money-wise, how to protect yourself against the ups and downs of life and money, and also how to plan for the future. He lays out a specific easy-to-follow step-by-step program to lay sound groundwork and then build upon it, to properly protect and provide for yourself financially. While the class is often provided & sponsored through a church, you do *not* have to be a member of that church to attend one. They are also quite reasonable, ranging between $90-$200 for a 9-week class session. And the class is fun! You watch a video lecture by Dave (and he is a FUNNY, engaging speaker), discuss, and then work thorugh some in-class exercises.

If you're not interested in attending a class, Dave Ramsey offers the video lectures as a home-study program on DVDs, online class, or even a stand-alone book, the Total Money Makeover. Really, for getting a handle on the basics of personal finance and money management, I cannot say enough good stuff about Dave Ramsey.

For the actual storage of records, what to keep, and how long to keep it, I recommend the personal-finance blog The Simple Dollar's posts on recordkeeping:
A Fresh Start: How To Organize All Of Your Financial Documents In A Filing Cabinet
Keeping Good Records
Nine Simple Things to Do to Get Ready for Tax Season Right Now!

The Simple Dollar's series 31 Days to Fix Your Finances (which you can read online for free or download the series for $2) is also an excellent primer and action plan for personal finance management.

Once you've got the basics down, then I recommend meeting with a financial planner first, then second a tax preparer or accountant; each can give you advice based on your specific situation. Ask around your circle of friends; someone will have a recommendation for a financial planner. The FP can then in turn recommend a tax preparer or accountant.
posted by Ardea alba at 8:13 AM on October 17, 2012 [6 favorites]

Consider exploring LearnVest. They have tools similar to (though I don't use them) but they also have "boot camps" that will walk you through addressing different parts of your financial health (retirement, savings, planning for a specific goal, paying off your debt, etc.)

Their daily email is one that I actually tend to scan instead of insta-deleting like I do most newsletters. If nothing else, it reminds me to spend part of each day thinking about my finances, and it really does provide a great perspective on how other women handle theirs.

The site is geared towards women, and shares stories/advice that address a wide range of income brackets.
posted by juliplease at 8:34 AM on October 17, 2012 [1 favorite]

I want to second Ardea alba's very good recommendation for Dave Ramsey. To get a brief exposure, try his podcast (on Itunes or here) or the real best place to start is with his book The Total Money Makeover (link above by Ardea alba). You could go for a long time without needing more than that. I don't have any problem recommending Dave Ramsey to my non-religious friends-- he wants everyone to take control of their own money and income, and there isn't very much faith-based stuff-- just enough to let you know that it is part of his life, but that's all. The guy has helped a lot of people, and his recommendations straddle the financial line where I am most comfortable-- encouraging people to get out of debt, have an emergency fund, etc. I love the podcast especially because it gives me that little daily push to stay on budget-- he talks many different callers every day, and most of them are either a good warning or a good inspiration. Both lessons are useful.
posted by seasparrow at 10:48 AM on October 17, 2012 [3 favorites]

Take a look at All Your Worth (by potential future MA senator, Elizabeth Warren). Rather than tracking every single latte, you start by divvying your income between three categories: 50% for essentials, 20% for savings, and 30% for nonessentials. Once you figure out which of those categories is out of balance, you can identify where you need to make your adjustments (e.g., not saving anything so emergencies wipe you out vs. saving enough but overspending on luxuries, etc.).
posted by scody at 10:49 AM on October 17, 2012 [3 favorites]

Tune in to right now. There is a great 3-day course on finances. It is supposed to be centered on self-employed business, but most of what I have seen so far today is about personal finances and creating a system for yourself. It's free if you watch live, or you can pay to download the whole course. They also replay the day's course each evening so you can watch it again if you missed it the first time.
Finding a lot of valuable info in there.

The best thing that I and my husband have each done for our finances was have 2 accounts. One is for essentials: bills, mortgage, gas, food, etc. The other one is personal savings. (We each have a separate one.) When you get paid make sure there is enough in the first account, and you don't have to worry about going broke later in the month because all bills are accounted for. Then put an "allowance" into the other account and this is for guilt-free spending. WAY easier than trying to leave enough in the account for later bills and accidentally going over.

As for the actual paper part, have lots of file folders. One for each company or item. (phone, mortgage, etc.). One folder (or box) for things that need to be done. (Bills, etc.) When the bill has been paid mark it on the actual page and file it. Try to file mail as it comes in rather than stacking it on the counter with other clutter.

Also, your bank can give you great advice for free on how to invest your money.
posted by photoexplorer at 2:21 PM on October 17, 2012

My husband and I really liked Get a Financial Life by Beth Kobliner for the really basic stuff.
posted by mon-ma-tron at 3:16 PM on October 17, 2012

I asked these questions a while back, the answers may be helpful.
posted by Kololo at 5:49 PM on October 17, 2012

I also agree that a financial planner can be super duper helpful and deal with people in your situation all the time. I think it is really important that you see a "fee-only" financial planner though. You can find one through:

These people are only paid for their time consulting and preparing with you and do not get any commission from selling you any products or getting you to invest in any one thing.

I went to one a few years back when I also felt lost. I took them a big pile of everything and they spit back a bound report that analyzed all my finances, made suggestions for me based on what my retirement goals were, etc.

I also really like the financial advice columnist Liz Weston:
She has a few books on personal finance. I used the one about credit scores to better understand my own credit. She also has some great books on beating debt.

Here's an article she wrote on what financial documents to purge and what to keep:

You should also get a real CPA (not one of those HR Block folks) to do your taxes. It will be more expensive but they will actually explain things to you. They will also tell you what you need to retain for your taxes: this form is similar to the one my CPA uses and gives you an idea of what they'll need from you.

If you can't find the info you need in your pile of papers, most of this stuff is also available on-line from your bank, your retirement fund entity, loan servicer, etc.
posted by dottiechang at 9:38 PM on October 17, 2012 [2 favorites]

Sorry, this is the form I mentioned:
posted by dottiechang at 11:14 PM on October 17, 2012

Nthing Suze Orman and also Nthing Mint. I'm a woman in my mid-thirties, and after hiring a CPA to do my taxes in 2004 (I was a contractor, my then-husband had his own business) and seeing how badly they were screwed up by a professional, I vowed to figure this all out myself. 8 years later and all my CC debt paid off in full, I feel like I have a handle on things. Suze is a good start, and I still watch her CNBC show every week.

Regarding getting organized, Suze also sells a kit to tell you what you need to keep and give you a place to keep it.
posted by getawaysticks at 6:59 AM on October 18, 2012

It's financial literacy month in Canada.
posted by what's her name at 7:20 AM on October 18, 2012

Tell me how you managed to be a financial grown up.

I did what many highly educated people do when they want to learn something: went to the library, read some books, attended some (virtual) lectures, and started collecting data.

There's a variety of books in your local library on personal finance of variable quality. My rule of thumb has been if you appear regularly on CNBC as an "expert," your book isn't worth reading. That means no Suze Orman, no Jim Cramer, no Robert Kiyosaki, no Gale Vaz-Oxlade. After a while you start reading the same thing over and over again, and you realize that half these people are pushing suboptimal plans primarily so they can put their name it. I also liked to read about finance sector crashes, as it seems they expose the charlatans and how they go awry. Michael Lewis has a few.

I also watched some lectures; Yale has a nice course on financial markets which explains how various contracts work and their history, without too much math. It's nice to understand what your mutual fund claims to be doing. I like the Planet Money podcast for its combination of economic theory and real-life situations. APM's Marketplace Money is generally a good podcast for busy professionals who are less finance savvy.

Then I started collecting data. Probably this started around the time I began handling the bills for my apartment and roommates, but maybe it was when I opened a Roth IRA. Originally I bought an accordion folder, but I quickly upgraded to a small plastic box file folder box -- basically a portable filing cabinet. All my tax returns, all my bank statements, etc go in there.

But if I had a key point for you it would be that personal finance is not a collection of papers and bank statements. It's hard to search through and the primacy of numbers makes paper a poor choice for financial organization in 2012. I started tracking all my stuff in GNUCash, a double entry accounting program, primarily because it's open source and it's kinda my job to be an open source expert. Such programs are a bit of work to start up, since you're starting in information poverty, both about accounting, and your own finances. But it can be automated nearly as well as Mint is, whilst keeping track of your net worth. It also documents account numbers, contact information, etc. Equally important, almost all of my bills pay themselves.

Finally, on the tax front, I recommend having an expert prepare your return at least the first go round. Next time you can try handling it on your own, with a worked example to double check. Perhaps the best short explanation of the federal tax system comes from the Get Rich Slowly blogger's book. With that overview of exemptions, deductions and tax brackets, it's not too hard to come up with a spreadsheet that mimics the 1040.

Tailoring this advice to your question: Bookwise, you want "One Year to an Organized Financial Life," written by a professional organizer. It flushes with mareli's strategy nicely.
posted by pwnguin at 8:50 PM on October 19, 2012 [1 favorite]

The U.S. Conference of Mayors and a few trade organizations have teamed up to offer a series of Financial Planning Days this month all around the country where you can go to lectures & workshops and talk to a CFP one-on-one with no pressure to buy any services. Unfortunately, if you're not near Indianapolis, Phoenix, Virginia Beach, or DC, it's already passed by.

And as pwnguin mentions, the Get Rich Slowly blog has a lot of info on making incremental and reasonable changes to your finances.
posted by psoas at 8:04 AM on October 22, 2012

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