Getting on the road toward financial freedom: there are several basic steps that anyone can take to reach economic empowerment. Here are three of them

Black Enterprise, Oct, 2004 by Lynnette Khalfani

DEBT, ACCORDING TO LYNNETTE KHALFANI, IS THE SINGLE WORST FOUR-LETTER WORD IN THE ENGLISH LANGUAGE. She describes it in her latest book, Zero Debt: The Ultimate Guide to Financial Freedom (Advantage World Press; $14,95) as "the longest-lasting economic curse, the most heinous financial plague, and the least recognized form of modern slavery afflicting Americans this millennium."

"Debt keeps you up late at night," she writes in the introduction. It drives people to drink, to fight with their spouse, and to have anxieties. The problem with debt is that the way we manage it has a huge impact on our daily lives. People who handle their debt better than others are the people who have better financial opportunities and benefits.

Khalfani is a former Wall Street Journal reporter for CNBC, whose work has also appeared in The New York Times and USA Today. Khalfani's second book offers a 30-day plan to help consumers take control of their finances and manage their credit properly. And while she divides her book into week-by-week steps, this particular book excerpt is from the three chapters that help consumers understand the basic steps of debt management as well as ways to overcome debt. As always, BLACK ENTERPRISE routinely revisits little-known ways to help consumers take control of their finances. Sometimes it's as complicated as knowing which stocks to buy at a given time; other times, it's something as simple as being organized. We assume that our readers are fairly advanced in their understanding of consumer issues and management, but every now and then we revert to retelling the basics. Here, we look at three basic key components to gaining financial freedom.--The Editors

BASIC STEP [NO. 1] SET UP A GOOD FILING SYSTEM

One of the best things you can do to get financially fit this year is to get yourself financially organized. So many of us want to whip our finances into shape, yet the task seems especially daunting because most households are overwhelmed by mounds of paperwork. But wouldn't it be great to have an easy, workable system for organizing all your financial documents--like those numerous credit card receipts, old bills, tax records, and quarterly investment statements? Well, here are some tips from a few experts [who] will help you get a handle on all your paperwork, streamline your home or office, better balance your time, and enhance your record and document management skills. As of today, you're going to create an easy-to-use filing and financial record-keeping system.

WHAT TO KEEP--AND WHAT TO THROW AWAY

Once you've gotten your files labeled, you may wonder how long you should keep certain financial documents. "As a rule, you should keep old tax records for at least seven years because that's how far back the law allows the IRS to go when it wants to audit you," says David Bach, a New York financial adviser and the author of Smart Women Finish Rich.

You should also hang on indefinitely to your stock, bond, and mutual fund statements--mainly because if you sell any of those investments later, you may need to demonstrate the cost basis of your investment to the IRS. Bach notes, however, that you don't need to keep those prospectuses that mutual fund companies mail you each quarter, so you can safely toss those.

Additionally, Harriet Schechter, author of Let Go of Clutter, says, "When in doubt, throw it out," when it comes to things like magazine articles, seminar handouts, and other "resource" materials you may have collected over the years.

BEING ORGANIZED HELPS YOUR FINANCES

In case you need any motivation, first consider all the benefits of getting rid of piles upon piles of paperwork and creating, for example, a decent filing system for your financial records. Schechter says that well-organized people can eliminate clutter and the stress related to it. They can also prevent piles of mail from accumulating, shed sentimental stuff without regret, and manage "mental clutter," she says.

MAINTAINING YOUR FILING SYSTEM

Once you've got a working system, of course the final step is to stay on top of your paperwork, so that it doesn't spiral out of control again. Experts say you should resist the urge to have general mail files--like the dreaded, all-purpose "in" and "out" baskets that seem to occupy almost every home office and work desk space. Instead, create a paper-flow system that instantly tells you what you're supposed to do with the mail that's held there.

For example, to quickly sort through mail--and it's best to do that the same day that it arrives--you can put it into categories labeled:

* "To Pay" (for bills, charitable solicitations, etc.)

* "To Read"

* "To File"

* "Correspondence"

* "Pending/Follow-ups"

* "Events/Invitations" or

* "To Share/Forward"

Once you weed through your files, purging unnecessary paperwork and reducing the amount of piles you have stacked up, chances are you'll be a lot clearer about your finances--and certainly better organized. What's more, if you take a few minutes each day to tackle your paperwork, you'll save yourself many hours--if not days--of having to wade through a morass of papers later in the year when you're trying to find some important document. This is particularly true when tax time rolls around. Imagine how great it would feel if you didn't have to go sifting through old piles of paper trying to justify all your tax deductions. Instead, you could simply turn over to your accountant or to a paid tax professional a nice, neat file of well-organized receipts and records. I can't guarantee that you'll be paying zero taxes ... but I can promise you that having organized paperwork and a well-kept filing system is a strategy that will make tax time a lot less taxing.