How to Organize Your Financial Records
Managing your finances can be stressful enough -- there's no need to make it harder by struggling with a mess of papers.
Here's how to use a simple, two-rule system to organize all your financial records, and how to keep them organized going forward.
1) Break everything down into three categories: taxes, debts and assets.
If that's not specific enough for you, you can create five categories: taxes, debts, assets, bank statements and utilities.
If five categories seems stressful right now, just stick to three.
If you are dealing with just a totally unorganized pile, this is a good way to start.
I give taxes their own category because they are usually why people have to get everything organized anyway.
Things that go in the tax "pile" or bucket include tax returns from past years, any tax-related forms or statements for taxes (like your annual mortgage interest deduction statement).
You should be able to do your taxes with just what's in the tax pile.
If you itemize deductions, you will need those bank statements, but I find it best to create a comprehensive list of all my tax deductions (with date, account paid from, what I paid for, who I paid it to, a category and a column for notes) and then put that in my tax folder, and then keep the bank statements in the assets pile going forward.
The debt pile includes documentation about any money you owe.
Your mortgage and student loan paperwork goes here, but so do your credit cards and your phone and your cable bills.
The phone and the cable bills are a little fuzzy (if you want more than three primary categories you can add a whole category just for "utilities"), but as they are things you make regular payments on, and thus have to manage due dates and payments for, I tend to lump them in with debts.
2) Organize all your categories (or piles, if that's more accurate) into past, present and future.
Get yourself some file folders now, a good label maker, and a box or a file cabinet to hold the folders.
I like to get colored folders, and then organize my five categories according to the five colors of file folders.
That way I can tell what a folder is for from across the room.
This makes picking up my office go faster.
If something is more than a week old, or has already been paid, its past.
I keep an annual folder for everything, so there's a 2010 phone bills folder, and a 2009 phone bills folder.
Anything more than a year old goes into a plastic file folder label with the year, so everything related to 2009 can be stacked in storage.
For past tax returns, though, I keep all my past tax returns in a fire-resistant metal box.
You can throw out tax returns older than seven years, but I don't.
"Present" files include bills you need to pay (these get their own folder) and paperwork associated with things you need to do (these also get their own folder).
I put these two folders in a very prominent place, in a wall-mounted plastic file-folder wall organizer.
The "future" files include paperwork for projects I want to do (like a trip to Greece).
This is a small category, but it can be helpful to have.
Some people make a "tickler" file, not necessarily for financial documents, that has a folder for every week of the year.
Then they can tuck papers that they want to be reminded of in that week.
Tickler files are great for season tickets, and for planning weekend trips and seasonal projects.
Here's how to use a simple, two-rule system to organize all your financial records, and how to keep them organized going forward.
1) Break everything down into three categories: taxes, debts and assets.
If that's not specific enough for you, you can create five categories: taxes, debts, assets, bank statements and utilities.
If five categories seems stressful right now, just stick to three.
If you are dealing with just a totally unorganized pile, this is a good way to start.
I give taxes their own category because they are usually why people have to get everything organized anyway.
Things that go in the tax "pile" or bucket include tax returns from past years, any tax-related forms or statements for taxes (like your annual mortgage interest deduction statement).
You should be able to do your taxes with just what's in the tax pile.
If you itemize deductions, you will need those bank statements, but I find it best to create a comprehensive list of all my tax deductions (with date, account paid from, what I paid for, who I paid it to, a category and a column for notes) and then put that in my tax folder, and then keep the bank statements in the assets pile going forward.
The debt pile includes documentation about any money you owe.
Your mortgage and student loan paperwork goes here, but so do your credit cards and your phone and your cable bills.
The phone and the cable bills are a little fuzzy (if you want more than three primary categories you can add a whole category just for "utilities"), but as they are things you make regular payments on, and thus have to manage due dates and payments for, I tend to lump them in with debts.
2) Organize all your categories (or piles, if that's more accurate) into past, present and future.
Get yourself some file folders now, a good label maker, and a box or a file cabinet to hold the folders.
I like to get colored folders, and then organize my five categories according to the five colors of file folders.
That way I can tell what a folder is for from across the room.
This makes picking up my office go faster.
If something is more than a week old, or has already been paid, its past.
I keep an annual folder for everything, so there's a 2010 phone bills folder, and a 2009 phone bills folder.
Anything more than a year old goes into a plastic file folder label with the year, so everything related to 2009 can be stacked in storage.
For past tax returns, though, I keep all my past tax returns in a fire-resistant metal box.
You can throw out tax returns older than seven years, but I don't.
"Present" files include bills you need to pay (these get their own folder) and paperwork associated with things you need to do (these also get their own folder).
I put these two folders in a very prominent place, in a wall-mounted plastic file-folder wall organizer.
The "future" files include paperwork for projects I want to do (like a trip to Greece).
This is a small category, but it can be helpful to have.
Some people make a "tickler" file, not necessarily for financial documents, that has a folder for every week of the year.
Then they can tuck papers that they want to be reminded of in that week.
Tickler files are great for season tickets, and for planning weekend trips and seasonal projects.