Is Wall Street hazardous to your wealth?

Your New Life: Getting Started
You don't have to start by getting organized. If you ever catch me in organization mode (filing bills, cleaning closets, sorting the piles of paper on my office floor), you'll know I have something hard to do that I'm putting off. You'll eventually want to track your net worth and create good financial files, but that can come later. It's best to begin with something that moves the ball down the field right away.

So surprise yourself by discovering what financial products you already have. This might require some excavating. You've probably forgotten some of the choices you made in earlier years. Many spouses and partners don't know what decisions the other has made — not because anything's hidden but because you haven't thought about it much. On the retirement front, you might be ignoring your 401(k) or other investments, crossing your fingers and hoping for the best. But by letting things ride, you give up on the chance of making them better. You might even find that your situation isn't as wiggy as you feared, just not well enough on track. If you truly haven't been doing enough, it's never too late. Or almost never. All you have to do is start.

So ... make a pile of your latest financial statements — bank accounts (checking and savings), debts (mortgage, home equity line, credit cards, and any other), insurance (life, homeowner's, auto, disability, umbrella — the amount and type), retirement accounts (what the plans are worth and how much you're contributing), any college savings, brokerage house and mutual-fund statements, real estate holdings, and other investments.

List all your debts — the balance, the interest rate, and how much you're paying every month — then set that part of the pile aside (don't even add it up, if that will scare you off).

Now for the interesting part. List all your investments and insurance policies, along with their current value. If you don't know their value, an approximation will do. Next to each item, write down why you own it. Something simple is enough. “I own life insurance to protect my family if I die.” Or, “I chose this mutual fund because it's a growth fund and I want my money to grow.” Or (be honest, here), “I bought 5,000 shares of Weirdo General because a guy told me it would triple.” If you know more, put that down, too. For example, “I chose this mutual fund because I looked it up and it did well over the past five years.” If you have no particular reason for owning something on your list, that's fine, too. Just leave it blank.

Or rather, leave it blank for now. This is your starting place. The idea is to fill in the blanks as you proceed, chapter by chapter, through this book. You'll be amazed at how helpful the “why do I own it” question is going to be. Asking it (and working out better answers than you had before) will do three wonderful things.

(1) You'll reflect on whether you need that particular item at all (maybe Weirdo General ought to be dumped). (2) You'll nail down, in your mind, what that product is supposed to contribute to your life. (3) You'll start thinking about whether it really meets your goals and, if not, what to substitute. Some of the financial products or services on your current list you'll find you definitely want to keep because they exactly fit your needs. Other things you will probably change because you've found something better.

As you make your decisions, you should record more detailed answers to the question “Why?” For example, instead of saying you own life insurance “to protect my family,” you'll write something like the following:

I bought $900,000 worth of term insurance from Neverfail Life Insurance Co. to support my family if I die. I figured that my spouse will need $35,000 per year for 20 years, to supplement his/her salary, plus $100,000 for each child's higher education. At age 55, I'll check to see if I still need coverage and, if so, how much.

Does that sound too complicated? Don't worry, you'll easily figure it out when you read Chapter 4. By recording these details, you'll have more than a mere life insurance policy — you have an insurance plan. Here's another example: Next to “401(k),” you might write:

I'm contributing 7 percent of salary. When I get my raise next March, I'll go up to 10 percent.

Bingo, that's another plan. You can tell your computer's calendar to remind you about your decision next March, or write it on the wall or desk calendar you use.

These notes have a very practical purpose. They help you keep track of your thinking process, which will be important when you forget (again!) why you made a particular choice. And don't worry, everyone forgets, me included. That's what happens when you have a busy life. At some point in the future, you'll have a new question about your personal finances. When you check back, this list will put you into the picture right away. It keeps you in control of your money and your plan. If something needs changing, you can pick up from where you left off without starting the “why” process all over again, from scratch. These notes can also be terrifically reassuring if — in the dark of night — you start wondering whether you've done the right thing. Let me say right here, that answer is going to be yes. When you've thought about why, you'll almost certainly be on track.

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