Review: One Year to an Organized Financial Life

Every other Sunday, The Simple Dollar reviews a personal finance book.

one yearThe title of this book pretty much sums it up.

One Year to an Organized Financial Life by Regina Leeds basically lays out a week-by-week plan for getting your financial house in order. The book is divided into twelve chapters (months), each containing four subsections (weeks in a month), and each of those sections details how to take control of a specific aspect of financial life.

The end result is something that feels very much like a detailed plan to follow. Personally, such a plan gives me mixed feelings – while it’s great for a person who just wants to be told what to do, I’m a big believer in understanding your finances and your motivations and, at times, this book feels more like a “just follow these steps” kind of guide than a “understand what you’re doing” book.

The big question, though, is whether the information is worthwhile. Let’s dig in.

January: Take Control
More than anything, this opening chapter focuses on information management. Quite often, people’s personal information is in a very unorganized state, with cards and receipts jammed in purses and papers tossed into boxes and filing cabinets. The solution? Start from scratch. Clean out your purse and figure out a good place to put that stuff. Start a real financial filing system. Even more important, go through your mind and start asking yourself why you make the choices that you do.

February: Assess Your Finances
This month is all about creating a budget. The process is standard by now: record all of your expenses, then parse them into groups that make sense to you, then from there figure out what you should be spending in each category and shoot for that new target. My concern here, though, is that to set up a really accurate budget, you need more than just a month. You have to record your expenses over a longer period of time than a mere month to get an accurate grasp on your money. Although the procedure here makes sense, stuffing it into such a short timeline does not.

March: Get Ready for Taxes
This chapter summarizes the process of doing your taxes. Collect your documents and your relevant receipts. Decide whether or not to use a professional or do it yourself. Then, take the plunge – fill out the paperwork and file. It’s a process that most of us (painfully) have to go through each spring. A big key suggested here is to start a filing system now to store all tax-related documents throughout the year so that when you do your taxes the following year, all of the receipts and other materials you need are ready to go.

April: Spend Less, Save More
Frugality is the buzzword here. This chapter focuses strongly on cutting your expenses – much of the advice is right in line with the ongoing “Trimming the Average Budget” series on The Simple Dollar. Hand in hand with that kind of trimming, though, is the need to actually save what you’ve been cutting, because the tendency often is to take that money and spend it on things that you seemingly couldn’t afford before, thus raising your standard of living and sticking you right back in the spot you started in.

May: Borrow Smart
Leeds covers the ins and outs of borrowing money here, largely supporting the good debt, bad debt dichotomy. The advice is smooth and straightforward: trim the “bad debt” (high interest debt) as quickly and efficiently as you can and don’t take on any more of it. Leeds does subscribe to the idea that “good debt” is largely good and mostly focuses on shopping around for home loans and auto loans, but as time goes on, I’m less and less of a fan of any kind of debt.

June: Build a Nest Egg
Retirement savings are next. Leeds’ advice is pretty straightforward: max out your 401(k) and then run the numbers to see if you need even more using a reliable retirement calculator. She also advises against underestimating what you need for retirement, making it clear that you’re better off with more than you need at retirement time than not enough.

July: Make Long-Range Financial Plans
What about your other long-term savings goals, like saving for your dream home? Leeds encourages most people to get a financial advisor for this task. On the other hand, given the great tools available on the internet, I think that most people today can actually handle their own long-term savings. The big keys are to make sure you’ve clearly specified your goals and to automate your savings so that it’s building on a regular basis over time without your manual intervention.

August: Refinance and Downsize Options
Sometimes, the old home mortgage gets to be overwhelming. In those times, refinancing and downsizing are two choices that people usually consider, and Leeds walks through these optiosn here. Ideally, of course, the tactics from the earlier chapters have put you in a better place with your money so that this isn’t a worry. A big key: maintain your good credit. Put a priority on maintaining a high credit rating and things like refinances will go much easier – plus you’ll find that your insurance rates are lower.

September: Children and Money
This chapter is of particular interest to me, since I’m a parent and I enjoy reading ideas for teaching good money values to my kids. Leeds suggests giving your child as much practice as possible with managing their own money, from an allowance to a job in their teen years. For college, parents should start a 529 as soon as possible and, perhaps more importantly, should get their children actively involved in saving and preparing financially for college.

October: Protect Your Assets
Here, the book felt perilously close to insurance salesmanship, as several different types of personal insurance are pushed hard. Leeds also encourages people to pay more in order to lave lower deductibles on their medical bills, which actually is a policy that I feel runs contrary to the advice given elsewhere in this book. After all, when you have your financial house in order with a nice emergency fund, you can afford the higher deductibles, so you should save on the premiums if you can on your health insurance.

November: The Season for Sane Spending
How do you keep your holiday spending under control? The best way to do it is to plan your shopping carefully. Instead of heading into the store with a head of steam and a big list, spend some time coming up with great gift ideas for each person you need to buy for, then researching how to get those items for a great price. Don’t let your impulsiveness run the day or you’ll find yourself spending a lot more than you ever intended to spend.

December: Year-End Money Moves
Most of the year-end money moves involve reviewing your spending and financial activity over the course of the past year (an awesome idea) and preparing for your taxes by doing things like harvesting any investment losses by selling now and making sure your charitable contributions are taken care of and adequately recorded (another great idea). In short, you should end the year by making sure all of your ducks are in a row and ready to set sail for the next year (and the coming tax season).

Is One Year to an Organized Financial Life Worth Reading?
One Year to an Organized Financial Life doesn’t offer many new ideas, perspectives, or angles on personal finance. Instead, what it offers is a clear organizational scheme – a very thorough step-by-step plan for people who simply prefer to have a plan to follow. In that regard, One Year to an Organized Financial Life is a home run.

I think what it comes down to is this: do you learn better by figuring things out for yourself, or do you learn better by following the patterns that someone else has set in place? If you’re in the former group – and I’d put myself there – One Year to an Organized Financial Life won’t do much for you. If you’re in the latter group, One Year to an Organized Financial Life will be an incredibly useful read.

One Year to an Organized Financial Life depends more on the reader than on anything else, as it provides exactly what the cover promises: a one year, step-by-step plan to financial organization.

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