A Guide to Organizing Your Financial Life

A key to staying on top of your finances is getting and staying organized.  Do you misplace and miss bills? Does it take you forever to locate important documents when you need them?  If an unexpected accident or illness left you unable to manage your finances, would your family or other trusted person know where to find your monthly budget, upcoming bills, or important documents? Do they have access to your accounts, so they can step in if needed?  Organizing these details means your family will not be left stressed, scrambling to keep things running smoothly.  Find a system that works for you and your life.  

Not many of us receive many bills in the mail anymore; but rather via email.  If you do receive mail, create a system in your household where you have a place to put and sort incoming mail.  Act on important mail right away by sorting it into an active/important file.  Immediately trash any junk mail. Once a week or each payday, sit down and process your bills, then file any documentation you may need to keep.

What to keep and for how long?

·        Bank Statements: keep for one year.

·        Credit Card Statements: keep for one year.

·        Retirement Account(s): keep for the life of the account.

·        Mortgage and loan records: keep for the life of the loan. Also, keep documents related to the sale or refinance of the property.

·        Insurance Policies: keep as long as the policy is active and then for seven years after the policy ends.

·        Tax Documents: keep returns and all supporting documentation, refunds, and payments for at least 7 years.  The IRS can audit you up to three years after you file, but can go back as far as seven years in case of major errors.

Shred old documents that contain personal or financial information to protect yourself for identity theft.

Where to keep important financial documents?

1)     Home Safe: Passport, Social Security Cards, Birth/Marriage/Death Certificates, Property Titles, Insurance Policies, and Estate Documents.

2)     Secure, waterproof, fireproof, lockable filing cabinet: tax returns, warranties, important receipts (for warranty items, large items, for tax reasons, and home repairs), bank statements, retirement statements, Health Savings Account and Flexible Spending Account statements, health records, and vehicle maintenance records.

3)     Digital Filing System.  You can scan and save important documents digitally as well.  Use a secure cloud storage service like Google Drive or OneDrive.  Make sure your cloud account has strong security, such as two-factor authentication.

Tips when creating a physical filing system:

1)     Color code broad categories such as Taxes, Banking, Retirement/Investments, Insurance, Utilities, and Loans

2)     Create subcategories such as: 2024 Tax Returns, Mortgage Statements, Car Loan, Auto Insurance, Home Insurance, Health Insurance, and Life Insurance.

3)     Be consistent with your labeling and ordering so you can quickly locate what you need.

4)     Keep updated – set a calendar reminder every quarter to go through your files disposing of no longer needed or old files.   

My Pro Tip - Create a Financial Binder

A financial binder is an easily accessible, one-stop for your main financial documents. It is key for someone to come in and take over your finances in an emergency or to grab in an evacuation.   It is important to keep it updated.  Also, keep the binder in a secure safe place and share where its’ location with someone you trust. I recommend keeping the most current document for the items in the binder, then keep the older documents in your file cabinet. Remember this is supposed to be a quick, one-stop, reference for your finances.

Use a three-ring binder and have labeled tab dividers. You can use plastic sleeves to protect important documents if you would like.  Here is what I recommend keeping in this binder:

·        Emergency Contact List

·        Professional Contact List: Doctors, Employer, Estate Attorney

·        Account List (for bank accounts and bills): Name, website, username, password, and account number

·        Budget that outlines your income and bills by date and how bills are paid (i.e. auto pay, transfer)

·        Current insurance policies – home, auto, medical, dental, and life

·        Credit Report

·        Paycheck stub

·        Loan documentation and last statement

·        Mortgage documentation and last statement

·        Rent Agreement and last payment

·        Latest statement for all bills – credit cards, utilities, etc.

Separate Binder for Retirement Accounts: I recommend keeping a separate binder for your retirement documents.  I also like to keep digital copies and a spreadsheet regarding balances and performance of my retirement and investment accounts.  Again, use labeled tab dividers for the following sections:

·        Comprehension retirement plan

·        Pension Statements

·        Retirement investment accounts (401k, Roth IRA, 457, 403b, etc.)

·        Social Security Statements

 Separate Binder for Estate Plan: If you have a comprehensive estate plan, your estate attorney probably provided you with an organized binder.  Otherwise, I recommend you keep all related estate documents together in one binder, clearly labeled, and its location shared with your family.  It is also essential to communicate and give a copy to your trustee and any other trusted persons who you want to have a copy.

Take time this month to get your financial house in order—whether that is creating a system to keep track of important documents or creating a financial binder to keep all essential documents in one place. Find a system that works for you and your life.  Sharing that information with a trusted family member can save time, reduce stress, and provide peace of mind during a difficult time.