What are tips I can use to organize my money?

Transcript:

Hey, humans! I’m Michael Liersch. This is the About Money podcast, presented by Wells Fargo. I’m a behavioral scientist with a PhD in cognitive psychology who loves openly discussing money to help humans better understand their money behaviors. By understanding our money behaviors, we all have the opportunity to make better money decisions.

In this season, we’re going to talk about how we can all sync up our life and our money. We call it LifeSync^®. You might be asking yourself, why does LifeSync matter? Well, when we align what we want to accomplish in life with our money, it can clarify whether money is truly working hard for us to get us to where we want to go. But that requires us to be intentional about what we want in our life, the jobs we want money to do for us, and compare it with how our money’s organized both now and in the future. To that end, we’re going to keep each episode under 10 minutes so that you can take immediate action to LifeSync. So let’s get into it.

In this episode, we’re going to answer the question: How can I organize my money? And I can tell you just from my own personal experience, when it gets into organizing your money, there’s a lot of emotions attached to it — and we all know that, and you don’t need behavioral research to understand that. And even if you feel you’re organized, I think it’s really important to listen to this episode because it’s going to be quick and you can really see if you’ve gotten to the truth of where your money is and how it’s held, and ultimately if there’s action that you might want to take based on how you’ve organized your money.

So, with that in mind, I’m going to give you a quick five-step process on how to get organized. Obviously, there’s going to be some extra work to do after this episode, but I hope you find it inspiring. So this first step, I just simply want you to write down all of the places where you think you have money. So I want you to think about everything from Social Security, I mean that’s money. Think about pensions from a job or work. Think about defined contribution plans, 401(k)s. Maybe you’ve had a couple of different jobs, you know, where’s that money? Think about IRAs, individual retirement accounts. Think about just the money that you’ve allocated to other people too, but maybe just not yet, like a 529. So think of that as an educational trust, you know, a UTMA. For some people, it has kind of a similar purpose.

And then just think about bank accounts. You know, where’s your money sitting in cash? Think about your investment accounts that you may have. And the taxable ones, what’s in them, you know? But first, just write them down. Where are they?

Insurance policies, those count too. And don’t forget your debts — mortgages, lines of credit, credit cards. Don’t forget some of the fun stuff too, like your home and the value of it. I know I mentioned a mortgage, but don’t forget the full value of the home. Maybe you have a secondary residence or investment properties — write those things down too. Maybe you own a business. Maybe you have points, you know, whether it’s airline points or credit card points, you know, that’s value too.

So, as you’re writing all these things down and you make your draft list of what these things are and where they are, really think about, once you have your draft together, working with a spouse or a partner or a trusted collaborator, a professional advisor, whomever that may be, to talk through that list too with you and say, is it complete? Did you forget things like a car or cars that you may own? Did you forget a boat? You know, other items that may not have occurred to you, and I kind of did that on purpose to kind of cue you into other thinking.

The second part of this process is to gather the documents or the statements or whatever it is that validates the value and/or ownership of those things. And we all know that we’re in this mode in the world today where some of the time those things are paper-based; sometimes those are online. Regardless, just make sure when you go through this process, you have either access to that information, that statement, those documents online or that you actually have the paper-based version.

The third step is to now, then, put the exact information related to all those items, and specifically their value, so the amount of money that they’re valued at. How it’s stored, meaning is it in an investment account? Is it in a bank account? You know, whatever that is and where it’s stored. And then, ultimately, how it’s allocated. And what I mean by that is when you think of something like an investment account, there can be a lot of different types. It can hold, you know, stocks, bonds, cash. So what’s the mix of those things?

So, in this third element, really start getting specific about what those tangible dollar amounts are, you know, where it is and how it’s stored — super important. Because in this fourth step, I’m going to ask you to add it up. What you want to take is the things that are positive. So think about a home. The home has a certain value, and then you have a mortgage. What you want to take is the value of that home and subtract it from the mortgage. You want to do that across all of the things that you own and owe and make sure that you get to the number or the dollar amount that comes out at the end of it.

And so, is that number positive? So do you own more than you owe? Is it neutral or even? Or is it negative? And for some of you who own a home, it can definitely be negative, especially if, you know, you or your family are working to have a job to pay that mortgage, and that is normal.

And within that framework, as you put that all down, I want you to ask yourself: Does this make sense to me? Does it look good? Do I feel good about all the money I have, where it is, and ultimately what the dynamics are around it?

Which gets to the fifth step: I want you to think about whether there’s one step you can take to organize your money just a little bit better to get the jobs done you need to with your money. I’m going to give you three quick ideas that many humans tell me once they do this that are surprises or realizations or aha moments that get them to take action.

The first one is making sure you have enough money just in case there’s an emergency and access to money. So, many people, they may own a lot of things or have a lot of value tied up in things that maybe they can’t sell very easily, but they may not have enough just, you know, in a bank account or available in a line of credit that just in case something happens — a car breaks down, they have a health event — that they could grab that money and make sure they’re OK temporarily until then things get relatively back to normal. So, in this first step, just make sure you have enough access to money to weather any of those types of storms — and you can do it today. You know, so make some deliberately different choices over the next couple of months to accumulate enough where you feel comfortable or get access to enough money to feel comfortable.

The second one is really around this idea of do you have enough for your future self? And that could require spending less to save or invest more. That could require working longer, all those different types of things. But really think about that dynamic and what can you do today to start paying yourself forward?

The third thing that I’d really highlight here is when you look at how your money’s organized, is there any way to simplify things? We actually have a tool at Wells Fargo called Account Aggregator where you can — literally, the accounts held away from Wells Fargo or at Wells Fargo, you can pull all of that information together. And sometimes what it highlights is there’s really easy ways to simplify your money so that you don’t go through this process or have to go through this process again and again and again where you’re pulling information from so many different places. Instead, you can try to find a way to pull it from fewer places because you’ve, you know, consolidated it in a sense.

So those are the quick ideas for you of how you can organize your money. I hope you have fun doing it. I certainly have in the past, and I continue to have fun doing it because then it really gives you those aha moments about how you can make the most of your money and align it with the jobs you want to get done.

That’s it for this episode of the About Money podcast. Please email us with the topics that you would like us to address at AboutMoney@wellsfargo.com. And if you really like the episode, share it with family, friends, and anyone who listens to podcasts. About Money is produced by Wells Fargo. You can learn more about ways to work with us at wellsfargo.com/aboutmoney. I’m Michael Liersch, asking you to talk about money today.

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