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Financial Records 101: Financial Recordkeeping Made Easy

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Financial Records 101: Financial Recordkeeping Made EasyWhile I was in college, my financial recordkeeping strategy consisted of throwing my important papers (all 6 or so of them) into a junk drawer.  Finding important financial records always ended up being a stressful process that wasn’t always successful, and my personal finances suffered as a result.

Once I got married and started working full time, I decided it was time to organize our financial records.  While spending a few days at home recovering from a knee surgery, I bought a water and fire proof safe and some folders, and started organizing the financial records that I had amassed in my junk drawer.

It took a couple of hours to do, but when I was finished, all of our financial records were organized in a single, secure location.  Now whenever I need a document, I know exactly where to find it.

You may have the greatest financial plan in the world, but if your financial records are not organized, it will likely be difficult to follow.  Fortunately, developing a financial recordkeeping system to manage your financial records is easy.  It may take a couple of hours, to set up, but it is well worth the time.

Finding a Financial Recordkeeping System

There is no right or wrong system for your financial records.  Find a financial recordkeeping system that works well for you and stick with it.  For example, some people go completely paperless while other people prefer to keep hard copies of all of their financial records.

There are pros and cons to both financial recordkeeping approaches.  A paperless records system takes up no space and is better on the environment, but may require a scannerA paper financial recordkeeping system may be more convenient in certain ways, but financial records take up space.  Most people probably use some combination of the two.

I have had clients all over the financial recordkeeping spectrum.  Some have been incredibly well organized, whereas others have adopted the dreaded “shoe box approach” (yes, some people really use that).  Some use paperless financial recordkeeping systems and others prefer hard copies.

Organizing your Financial Records

I suggest you get organized by doing the following steps:

1.  Obtain the needed supplies

For a paper system, you can purchase a ready-made system, such as Suze Orman Ultimate Protection Portfolio Kit

Alternatively, you can make your own recordkeeping system, like what I did.  If you choose this option, I suggest purchasing a water and fire proof file cabinet or safe that you can lock to store your documents.  You will also likely need some hanging folders and manila folders to go inside.

If you plan on going completely paperless, you can set up appropriate folders on your computer.  Make sure you back everything up though so that all is not lost if your computer crashes.

2.  Create a file for each relevant financial category.

Although categories vary by person or family, common categories include:

  • Advisors:  List of the names and contact information of your attorney, CPA, and other financial advisors.
  • Bank Accounts:  Statements from your bank accounts and deposits: checking, savings, money market, and cds
  • Bills:  Bills that still need to be paid.
  • BudgetCopy of your budget
  • Career:  Paycheck stubs, resume, employee benefits information, etc
  • Contracts:  Contracts you enter into, such as for employment, property management, etc.
  • Credit:  Monthly credit card statements copy of credit report and FICO scores (credit score your lender most likely uses)
  • Education:  Diplomas, certificates, and transcripts
  • Estate Planning:  Copies of your will, trust agreements, beneficiary designations, powers of attorney, advanced medical directive, and other estate planning documents.
  • Food Storage:  Current food storage inventory
  • Goals:  Copy of plan for how you will cut expenses, increase income, get out of debt, save for education and teach your children about money
  • Healthcare:  HSA or FSA statements, health records, including vaccination records.  Also keep copies of your medical expenses; if they are significant, you may receive an itemized deduction for a portion of them.
  • Important documents:  Passports, social security cards, adoption records, birth certificates, citizenship papers, etc.
  • Insurance:  Copies of all insurance policies, including life, homeowners, auto, personal liability, medical, disability, and long term care.  Also keep copies of any claims filed.
  • Investments:  Account statements for brokerage accounts, IRAs, 401(k)s, 529 plans, and other investments.
  • Loans:  All mortgage and consumer loan documentation during the life of the loan & copy of getting out of debt plan
  • Real estate:  Keep all records relating to purchase and sale, improvements, repairs, etc.
  • Taxes:  Summary of any tax planning, IRS correspondence, &  prior tax returns as well as documents required to complete your current tax return (i.e. w-2, 1099s, records of charitable giving, K-1s, receipts, etc).  I err on the side of caution and keep all tax documents for at least 7 years (some should be kept even longer), although 3 years might be long enough in some cases
  • Utilities:  Statements for cable or satellite tv, gas, electric, water, phone, etc.
  • Vehicles:  Maintenance records, title, and warranty.
  • Warranties:  Keep all warranties until the item is no longer under warranty.  Also keep owner’s manuals.

3.  Assemble all of your financial records and file them

Assemble all of your important documents and file them.  Whenever you receive a new document, file it immediately before it gets lost.

4.  Shred financial records you no longer need

Decide how long you should keep each document.  Once you no longer need a document, put it through the shredder and then toss it to reduce clutter and prevent identity theft.

Final Thoughts about Financial Recordkeeping

Establishing a good financial recordkeeping system that works for you may help you in the following ways:

  • Be more organized
  • Stay on top of your personal finances
  • Avoid paying interest and penalties due to missed payments
  • Help you save money on advisor fees (they will spend less time searching for, requesting, and organizing documents)
  • Reduce the financial stress in your life.

Additional Information

For additional financial recordkeeping and organization insights, check out the following book:

Did I forget anything?  What tips do you have about financial recordkeeping?  Leave a comment below!

Image: CherylCasey/Bigstock


{ 1 comment… add one }

  • Fredacille January 16, 2013, 12:27 pm

    Thank you for the article. I really need to get my finances organized and this was helpful.


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