How To Organize Your Financial Records
Year after year I lived with the stress of disorganized paper piles scattered around the house. There were little stacks here and there, by the entryway, in the kitchen and on my desk. I had an inbox/outbox system, but it didn't work effectively. Bills would get lost, statements rarely made it to their files and I could never find what I needed when I needed it. In the most basic way, my finances were not organized properly.
"Keep systems as simple as possible so that things fall into place with little or no effort." -Pat S. More, The Queen of Clutter
Managing your finances effectively requires a system for keeping track of all of your bills, financial statements, insurance policies and other important paperwork. It does not require you to save every scrap of paper, receipt or bill that passes through your hands. Below is a guide to help you determine what you need to hold on to and what you can shred. Once you are clear on these requirements, you can clean out your old files and stacks of papers and set up a system that is quick and simple to keep up with daily.
What Should Be Filed? What Should Be Tossed?
Most of us save way too much paperwork, which becomes a burden to manage. It is not necessary to save every ATM receipt or cable bill. How often have you needed them for reference? Make a habit of going through all of the mail every day and getting rid of anything you don't need. Constantly stay on top of the flow of paper into the house, through your office, or stacked on your desk.
Once you have established a working system, it will take only a few minutes each day to keep it in order.
Here is a quick look at some of the financial papers that you need to hang on to and file, and the ones you can toss. Keep in mind when "tossing" that shredding and recycling is the most responsible way to go—for your identity protection and the planet.
- Paycheck stubs: Once you have checked your pay stubs for accuracy, they are not needed. You can save the most recent one, in case you need it for proof of employment when applying for a loan.
- Bank Statements, Canceled Checks: Save and file bank statements for a full three tax years. They will be needed if you are audited and can serve as a receipt to prove paid bills. Canceled checks should be saved for a year at least. When statements and checks are no longer relevant, burn or shred them.
- Utility Bills: There is no need to save utility bills for months or years. When a bill comes, check to be sure you were credited for the last payment, then toss or shred the old bill. Save only the most current.
- Credit Card Statements: As with utility bills, check to be certain you were credited for your last payment and keep only the most current statement. No need to clog up your files with old credit card statements unless those cards were used for tax deductible expenses.
- Insurance Policies and Bills: Save these for the time they are current and in effect. Canceled policies and related statements can be tossed.
- Deposit Slips, Debit Card Receipts and ATM Slips: Save them only until your next bank statement arrives so you can check them and verify the amounts. As long as they do not represent a tax-deductible expense and won't be needed as proof for a warrany claim, you can toss them.
- Property Records: Real estate records need to be kept for the duration of ownership. If there is a chance the records will be needed for tax purposes, save them following a transfer of ownership or sale.
- Investment Records: All investment records and bank statements related to investments should be saved. If your statements are cumulative, you can keep just the most recent and shred the outdated paperwork.
Take the time to go through all of your paper—including old files—to clear out anything that is no longer needed. This will make the task of organizing your financial records easier and less cluttered. Ultimately, you will have an organized filing system that will allow you to find what you need at a moment's notice.
Set Up a Filing System
There are several different kinds of filing systems to consider. Depending on your needs, anything from a portable accordion file to a small filing cabinet could be required. Once you have cleaned out all the excess financial paperwork, evaluate how much space you will need to store the remainder of your files. Go just a little larger than you currently need, so you don't have to worry about moving to a larger system later and you can file papers quickly and easily.
I use a simple traditional filing system with tabs for each category (see section above for general categories). Additionally, I have separate files to store important papers for each of my children, medical bills and insurance. Each insurance policy and related statement have their own file as well.
Set up a bill-paying station. This can be a simple small storage box containing everything you need to pay your bills, a desktop file organizer or a calendar based organizing product designed specifically for this task. Even if you pay the majority of your bills online, you will still inevitably need to pay odd bills the "old fashioned" way and require your checkbook, stamps etc in a convenient location. Instead of a single "to be paid" file, I use a calendar based system. Paying as many bills online as possible helps keep the paper to a minimum and I can mark my calendar for those payments due as well.
Documents That Ought to Be Stored in a Safe
To be on the safe side, consider storing the following important, often irreplaceable documents in a rented safe deposit box or in a fireproof safe in your home.
- Birth, death and marriage certificates
- Settlement, custody and divorce papers
- Adoption or citizenship papers
- Property deeds, motor vehicle titles
- Stocks, US Savings Bonds
- Mortgage and land contracts, or any legally binding agreements
- Military papers
- Patents, copyrights
- A list of your home inventory including photos and receipts.
In Case of Emergency
Are you the only one in your family who handles the bill paying and financial filing? Would your spouse or other loved one be able to find needed paperwork in your absence?
Take the time to set up an "In Case of Emergency" file that explains your system, clarifies where important legal and insurance information is stored and instructions on how to find what may be needed in an emergency. Include important phone numbers, such as those for your accountant, attorney and investment broker. Mark the file clearly so it can be easily found in your absence. Keep it updated on a regular basis.
Make a Commitment
The key to making any filing system work and keeping your financial records well organized is making a commitment to keeping up with it daily. Once your system is in place, take a few minutes every day to sort mail, file statements and stay up to date with your bills.
Soon, you will have established a habit that is essential to your long term financial health and will have reduced some of the stress generated by managing your finances.
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This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.