Do You Know Where Your Money Is?

Excerpted from
Smart Women Finish Rich: 9 Steps to Achieving Financial Security and Funding Your Dreams
By David Bach

If I asked you about your current financial status, could you. right now, list on a blank piece of paper all your assets and liabilities, including your investments, bank accounts, mortgages, and credit-card debts? Do you have an organized filing system in which all your financial documents can be found easily? Or have you left all that stuff to your husband or your accountant? If you're working, do you know how the money in your company pension plan is invested?

You might want to turn back to Step One at this point and take a look at how you did on that quiz about your family's money. If you are like most people, you probably scored lower than you'd like. That's okay. This is where we start to fix the problems you found back there.

Knowing Where Your Money Is Sounds Obvious,
but Trust Me-Most People Don't Have a Clue

Having been a financial coach for hundreds of clients, I can tell you from firsthand experience that most people really don't know where they spend their money and where their money is invested. I've had clients come into my office with shopping bags fillet! with mutual fund statements, bank statements. 401 (k) printouts, you name it. Take Karen and Tom, a successful couple in their 50s. They came into my office one day, dumped the contents of a bulging department-store shopping bag onto my desk, and announced ruefully, "David, we're the people you talk, about in your seminars!" We started going through their statements together, and you know what? Even though Karen and Tom had been organized enough to save the statements they'd been sent, most of the envelopes had never been opened! They hadn't looked at their accounts for months.

Now, I'm sure that you're not like this, but I'll bet many of your friends are.

Six IRAs, Five Bank Accounts,
Four Insurance Plans ...

After two hours of going through Karen and Toms stuff, we managed to figure out where all their money was: It was stashed in 12 separate mutual funds, six different IK A accounts, five bank accounts, two old and two new 40l(k) plans, and four separate insurance policies.

Unbelievable, right? Wrong. Karen and Tom are typical of many successful people. As Karen explained it, somewhat defensively, "Tom puts all the responsibility of managing the money in my hands, but with a career and three kids I don't have time to keep track of it all. I really don't know how others find the time."

"You're right, Karen," I said, "No one has the time to monitor what they have, unless they are professional money managers. And I know a lot of professionals who don't take care of their own money because they're so busy taking care of other people's!"

Make Getting Your Financial House in Order Now a Priority!

Old or young, rich or poor, married or single, it doesn't matter-one of the first things we do at The Bach Group after discussing our clients' values is to figure out their current financial condition.

To accomplish this, I have my clients till out what we call a Finish Rich Inventory Planner.

If you are like most people, you probably already have all your financial information totally organized. In fact, I'm sure that all of your financial documents are right now sitting in an easy-to-use filing sys tem with brightly colored folders and neatly typed labels. And because all your financial documents are so well organized and easy for you to review, completing the worksheet in the back of the book shouldn't take you more than 30 minutes, right?

Obviously, I'm being a bit facetious here. Usually when I discuss filling out the FinishRich Inventory Planner'" in my investment classes, I call this project a "homework assignment." And when I get to the part about most people having all their financial information in color-coded files, the women in the room either laugh or groan. At that point, I say, "For those of you who use the shopping-bag approach to filing, it may take a little longer."

To be honest, I have had some clients who've told me that this "homework" took them only about 15 minutes (usually because they had everything on a financial software program like Quicken or Microsoft Money). But for most people, it generally takes at least an hour or two.

And don't worry if it takes you even longer than that. Some people find the assignment requires an entire weekend. If you're one of them, don't be daunted. It simply means that you really need to do it!

Getting Organized Is One of the Keys to Financial Security

Admittedly, getting organized sometimes can be a painful experience. I've had some clients who thought they were financially secure, only to discover, after listing all their assets and liabilities, that they weren't doing as well as they had imagined. Then again, I've had plenty of others who completed the worksheet and found they were much closer to financial independence than they realized. Either way, they were much better off knowing the truth about their financial situation.

Take Betsy and Victor, two clients of mine who got a lot out of the process. Their story is quite typical, and I hope it will inspire you to emulate their example.

Do Your Homework

The way we work at my office is simple. We send prospective clients the FinishRich Inventory Planner and ask them to till it out completely before they come in. Nonetheless, some clients show-up without having filled out their sheets. Often I'll kid them and ask if they were the kind of students who never did their homework on time. Joking aside, however, there's no getting around the fundamental reality: Until you get your finances organized, you can't get started creating financial security-and ultimately your financial dreams.

So no excuses. When you finish this book, you must fill out the Finish Rich Inventory Planner in Appendix 2. It's the best way to start getting organized and involved in your finances and, most important, determine your net worth. (This is key, since if you don't know what you are worth, you won't know where you are starting from.) By the time you are done, you will have a better grasp of your financial situation than the vast majority of Americans. You will know not only your personal net worth but also where you spend your money and how your newfound wealth is going to be built. You-not someone else-will be in charge of your financial destiny.