Organizing Financial Records Effectively
When tax time is near, do you spend more time digging and sorting through papers than you feel you should? If you were called upon to retrieve a financial or medical document from several years past, would you be able to produce it? If not, then you may want to consider re-assessing your system of record keeping.
An effective record-keeping system is always unique to the individual. However, it's likely that most follow the same basic structure:
- Organize Current Documents
- Archive Older Documents
- Store Priceless Documents Safely
With the information below, you can assess your current record-keeping strategy and determine if any changes would be beneficial for you.
Organize Current Documents
You leave a paper trail every day. Receipts from simple daily transactions, unpaid bills, bank statements, and credit card information are just a few of the items that add up to the record of your personal finances. How do you keep track of them?
Have a file or drawer designated for your active records, and develop a simple system that you can use every day to keep them neat and organized. Your file might include:
- Dated Receipts. Keep daily, weekly, and monthly collections of receipts organized so that you can find them easily during tax time. The IRS has three years to audit your federal income tax, so keep receipts for at least three years.
- Bills, Both Paid and Unpaid. When you pay a bill, write the date it was paid on the form and store it. If you pay bills online, print a receipt, and file it the same way.
- Bank Statements. Keep bank statements for reference in case your account's security is ever compromised.
- Medical and Health Records. Should you ever need to be hospitalized or undergo medical care, your health care provider or insurance company may request your previous medical records.
Archive Older Documents
You may wish to remove records that are more than three years old from your active documents file. But in doing so, be careful not to discard these documents. Instead, archive them in a separate file, just in case.
Store Priceless Documents
Some papers are impossible or extremely difficult to replace, so you should take every precaution to keep them safe. Consider storing the following information in a fireproof family safe or in a safe deposit box at your bank:
- Birth, Adoption, and Death Certificates
- Marriage and Divorce Papers
- Wills
- Deeds, Titles, and Other Property-Officiating Documents
- Investment Records
- Inventory of Household Valuables
By revisiting your method of storing your important information, you can be sure that all of your bases remain covered. Take a few minutes to ensure that your system works as efficiently as possible. A short planning period now could save you hours of frustration, stress, and worry the next time you're asked to produce significant records.
