Organizing your finances doesn’t have to be a beast. Here's a methodical way to tackle those piles of accumulated paperwork.
Credit card receipts, bank statements, investment account updates, insurance forms, your first ever tax return — life produces a never-ending stream of personal finance-related detritus. What’s the trick to organizing your finances and beating back the growing piles of accumulated paperwork?
The trick is to just start, which is what we’re going to help you do. But first and important note: This is not the time to stew over every piece of paper you touch or digital file you mouse over. The goal right now is to contain the financial clutter and institute some order to make it easy to set up a filing system. Here are the four most important steps to get you started organizing your finances:
1. Drag the Piles To One Place
Like organizational guru Marie Kondo recommends, start your journey by dumping out everything in one place so you can have a good cry over the mess you’re dealing with. (Or maybe that’s just me.)
This is your sorting room (or corner of the living room rug). And don’t worry: The mountain you’re facing is about to be tamed. You gather it in one place so you’re not running around from room to room throughout the process. It also ensures that you’re able to assess the entirety of the project.
A word about digital clutter: If you conduct some of your financial affairs online and others via hard copy, you’ll need to deal with digital piles and paper piles separately for now. That’s okay. For online files you can create a master folder to hold all other folders and random documents at this point.
2. Create Your Categories
Now it’s time to make some fresh new piles! This will either be a brief exercise (if you’ve been somewhat organized with your paperwork) or a task to complete while binging Schitt’s Creek, the entire series (if you tend to start new piles every couple of months like me). Your job here is to simply put like items with like.
Here are some suggested categories for your financial organization project. Adjust to best suit your situation:
- Banking: All things related to checking and savings accounts
- Credit cards: Statements and other account information; receipts (including the ones jammed at the bottom of your purse)
- Bills: Utility and other bills for services (but put bills for insurance and car-related costs, for example, in those respective piles)
- Retirement/investment accounts: IRAs, 401(k)s, pension statements, annuities information, brokerage statements and investment purchase and sale receipts. You can also toss Social Security statements in here if you’re not already retired. If you are retired, create a separate Social Security pile.
- Taxes: Tax stuff
- Home: If you’re a homeowner you’ll put your loan docs, deed, closing docs, etc. in here
- Auto: All things car-related, including the title and receipts for repairs and maintenance
- Insurance policies: Home, car, life, long-term care; you can include medical bills here, or create a separate “Medical” pile for all healthcare-related paperwork
- Big purchases: Receipts/paperwork/warranties for big purchases (e.g. appliances, Vespas, home improvements)
Note: This is not the time to get distracted by each and every piece of paper. That’s a rabbit hole you don’t want to go down at the onset of organizing your finances. As you’re doing this you’ll see some obvious candidates to throw in the trash. Set those aside for the moment until we get to that satisfying step.
3. Set Aside These Special Documents
Certain records are important to be locatable at a moment’s notice. We’re talking about estate-related paperwork — important medical and financial information you may need in case of an emergency. You don’t want to be fumbling around to find a loved one’s power of attorney while you’re dealing with a stressful situation, like a medical emergency.
This list of documents includes copies (not the originals) of your will, living will, advance medical and financial directives. Here’s more on the five estate planning must-dos for those who don’t already have up-to-date paperwork.
In addition to the original copies of wills and other estate planning records, put the following aside in a separate folder. Eventually these belong in a fireproof safe or safety deposit box for long-term storage.
- Deeds and titles for real estate, land or property that you own
- Marriage/divorce licenses
- Social Security card/birth certificate
- Records from education or military service
- Physical certificates for stock, CDs or bonds
- Pre-arranged funeral information and receipts
- Original will, living will and advance medical and financial directives.
4. Play the “Keep or Toss” Game
Now for the fun part. If you have a shredder, fire it up! Also acceptable: Any form of fire (grill, fireplace, burn barrel) that you can use to safely destroy discarded documents.
For the purposes of whittling down your paper trail even more, it’s time to go through the piles of receipts, pay stubs, tax returns and contracts and pick what to keep and what to toss. For example, the IRS has specific recommendations on documents you should keep anywhere from two to seven years.
What about real estate records, receipts, loans that you’ve paid off, check stubs and so on? We got you. Here’s the HerMoney guide to what financial records to keep (and for how long) and what to toss.
Once you’ve gotten to this point in organizing your finances, you deserve a break. Admire the categorized piles you’ve made and give last rites to the paperwork you’ve tossed. After you buy some cute file folders and make a few adjustments, you’ll be the picture of financial organization.
More on HerMoney to help you organize your finances:
- In a hurry? Here are the financial documents you need to gather before you evacuate.
- Jean’s advice on six ways to spring clean your finances
- How many — and what kind of — bank accounts should you really have?
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