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Simplifying Your Financial Life, Part 2

There are many reasons to organize and simplify your financial life. Eliminating clutter, saving time and reducing stress are surely among them. And here's another motivating factor: Not keeping tabs on your finances can be costly if it results in fees or interest charges you could have avoided, investment losses, additional taxes or other pitfalls. Below are four basic things you can do to get your money matters in order...and keep them that way.

Look into automated money-management tools. Software that you download to your computer or web services managed by your bank or another third-party can give you an updated snapshot of all your account information from multiple institutions, in one place. The programs also can help you organize your finances, understand how you spend your money, and spot a potential fraud or theft (by providing a regular summary of account balances).

But it's also important to take commonsense precautions. You need to do your research and choose a known and trusted organization, as most of these services collect account numbers and passwords along with other confidential and personally identifiable information.

Update your will and other legal documents, and make sure your family knows where to find them in an emergency. These additional documents can range from bank statements and pension records to directives that govern what happens to your bank accounts, property and other assets if you become incapacitated.

In addition to reviewing your will (and letting loved ones know where to locate the original), check the beneficiaries listed on life insurance policies and retirement accounts and consider having or updating documents (such as a "durable power of attorney") that would enable someone to handle your finances or other personal matters if you lose the ability to do so.

Get your other papers under control. Even if you rely on technology, it's difficult to go completely paperless. Start with a central filing system at home for your bank, tax, insurance and other financial records. Also, designate one place for gathering your bills.

Don't let a disaster catch you off guard. If an emergency were to occur and you had only a few moments to evacuate your home, perhaps for several days or even weeks, would you have access to cash, banking services and the personal identification you need to conduct your day-to-day financial life? One strategy is to store copies of important documents — such as health insurance cards, your driver's license, bank account numbers and credit card information — on a secure website that you can access from anywhere.

The bottom line, by spending a few minutes organizing and simplifying your financial life, you can save many hours and perhaps significant amounts of money.