The Best Way To Organize Finances In The Digital Age, According to a Certified Financial Planner

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Playing 4 Steps To Organizing Your Finances Like a Millennial, According to a Personal Finance Expert
4 Steps To Organizing Your Finances Like a Millennial, According to a Personal Finance Expert Aired May 14, 2019

Just like pretty much every aspect of our lives, our financial lives are going more and more digital. Technology is changing the way we earn, save and spend our money — so it's more important than ever that we know how to keep our assets organized in a way that makes sense in the digital age.

That's where the founder and CEO of LearnVest, Alexa von Tobel comes in.

The Certified Financial Planner stopped by our show to share her best tips for being more "financially forward" — which is also the name of her newest book!

The key to being financially forward? Organizing your finances. Here's how to do it in four manageable steps, according to the personal finance expert.

STEP #1: TAKE INVENTORY OF YOUR FINANCES

"I can't even tell you how many times people don't even know where all their money is," Alexa tells us. "We just need to get them all in one place."

To do this, Alexa suggests simply making a list of all of your financial assets. Start with the more obvious places, like your checking and savings accounts and any retirement funds through your current employer.

Also consider accounts you may have forgotten about, such as old store credit cards you once opened or 401ks from previous jobs.

And don't forget about tangible assets like cars, expensive jewelry and electronics, either.

Once you've written down every asset you can think of, it's time to move on to the next step.

STEP #2: CREATE A DIGITAL MONEY MANAGEMENT SYSTEM

"Once we actually get the full snapshot of everything that exists, then we say, 'let's get hyper-organized,'" the financial expert says.

She explains that you can easily take advantage of technology to help streamline your finances. Here are her top three tips.

PICK AN APP

"The first thing we like to do is download great apps," Alexa says.

She recommends a free app called Personal Capital, which allows you to link your accounts and track all your cash flows.

"It's really straightforward — it shows you where your money's going every single month," Alexa says. "I call it a money minute. You take one minute, you log in, you see what's happening with your finances."

CREATE AN EMAIL ACCOUNT

After that, she suggests creating an email address solely for your finances. Something simple, such as 'alexasbills@mail.com.'

"Take all of your assets and all of the places that those exist and you have all those bills go to one place," she advises.

Then, make sure you're actually checking them! By carefully looking over your bills, you may find places where you're being overcharged, according to Alexa.

"Every time you check, there will be extra money. So I want people to read their bills," she says.

DIGITIZE IMPORTANT DOCUMENTS

You can digitize important documents such as estates, wills and trusts by using your phone to scan or take a photo of the paperwork. Most smartphones automatically back up files using cloud-based storage, so even if you break or lose your phone, your files should be safe.

Put the physical documents away in a safe place or give them to a family member so that they're all there in case you need them for any reason.

And there you have it — your digital money management system!

STEP #3: SIMPLIFY YOUR ACCOUNTS

Fewer is better when it comes to credit cards and bank accounts, the Certified Financial Planner says.

"You can only close one credit card a year — not more, because it actually dips your credit score," she continues. "But we just want you to rein in the amount of places that you have banking."

Think of your credit cards and accounts "as live wires," Alexa says. "That's a direct place that somebody could [commit] identity theft against you."

So again, the fewer you have open, the better.

STEP #4: KNOW YOUR NUMBERS

Finally, know your numbers. There are three major numbers everyone should know, according to the expert.

NET WORTH

Net Worth graphic
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Know your net worth. Simply take your assets (which you inventoried above) and subtract any debt (mortgages, car payments, etc).

"Everybody should know this [number]. This is your true net worth," Alexa says.

MONTHLY TAKE-HOME PAY

Take-Home Pay graphic
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The second key number to know is your take-home pay as a household.

"The really important thing here is just starting to think about your life in post-tax dollars," Alexa reminds us. "It really makes a big difference."

CREDIT SCORE

Credit Score graphic
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Last but certainly not least, your credit score! There are many sites that can help you out, including AnnualCreditReport.com and CreditKarma.com, according to Alexa.

Credit scores can range anywhere between 300 and 850.

"I want you to be above 760," Alexa says. "You just need to always know this number."

RELATED: What to Do If You Find an Error On Your Credit Report

After you complete these steps, you have a full, digital financial management system.

"And you now can stand in your own truth and tackle your finances," Alexa says.

Go ahead and give yourself a pat on the back!

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