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How to Organize Your Finances
Wouldn’t it be great to be able to organize your finances? There is nothing worse than trying to locate an important financial document and not being able to find it! It took me years to finally create an organized system that enables me to find whatever document it is that I need.
It wasn’t that it was hard to develop a filing system, that was easy, it was more the fact that I had to find all of the documents lying around the house and file them away into this new filing system I created. I was constantly looking for old tax returns or old bills, statements, etc. and I wanted to get them organized once and for all to save myself the anxiety I felt every time I couldn’t find something.
Once I got all of my financials organized I felt a sense of relief, and it now saves me so much time (especially at tax time).
Creating a filing system to organize your finances will not only save you anxiety and time, but it will also help you to see your whole financial picture and where you stand financially.
While there are a lot of software programs and websites today that help you organize your finances (free tax software, online banking, tax programs, etc.), I still think it is essential to have an “old fashion” paper filing system as well especially for some items because in the worse case scenario that something happens to you, your loved ones will need access to this information!
Building a Filing System to Organize Your Finances
For my system, I used hanging files with folders within them to separate the different items and sort them, but you can use just folders if that is all you have. The important thing right now is to give every document a home.
You can always get fancy later if you want to but for now, I don’t recommend spending a ton of money just to make a filing system. If you can get a water and fire proof filing box that would be great, this is important for home insurance and life insurance policies in case of a fire or flood. If not, you can use a file box system, a plastic container file system or a file cabinet.
How to Categorize your Financial Documents
Each Family/Individual will have different categories, but these are ones that I use and that most people would probably need. You should, at least, have these to start and then you can always add more if needed. The important thing to think about is when you have a document, that you can easily say “this goes into xxxx folder.” So as you are creating your folders make sure all your documents have a home.
Tax Returns- Put all your tax returns into this folder. You can sort them by year going back 3-7 years depending on your circumstances. You can find out more about how long on the IRS.gov website.
Retirement Accounts- Put retirement papers into this folder. Statements from your 401K, Pension, etc
Investment Accounts- If you don’t have any you can leave this one out, you can put in the kids 529 accounts, etc. in this folder as well.
Savings and Checking Accounts-I advise people to go paperless, but it’s good to keep at least one statement for each account in this folder even if you have to print it out once every six months or so. It’s an easy way to quickly access information.
Home Accounts-Keep your Mortgage Papers, inspection papers, warranties, If you make any major changes to your home (new roof, etc.) keep those receipts and paperwork here as well in case you ever sell your home or need them for warranty or insurance purposes.
Insurance– Keep your life insurance papers, homeowner’s insurance papers, car insurance in this folder. You can even keep your health insurance information here as well. This is one of the most important folders and if possible, should be kept in a fire/waterproof box so that you can get your home insurance papers if there were a fire.
Credit Cards- If you have paperless statements; which I recommend, print out your last statement just to have a quick access statement handy. This folder can also be used to help you pay down credit card debt. Write your balance on the outside and keep crossing it out until it is $0, this will keep you motivated to pay it off and get rid of the folder. If you don’t have debt, you can just keep these paperless and skip this step as long as you have digital access to your account in case of an issue.
Other Debt: Keep student loans, car loans, etc. in separate folders as well. I like to keep these digital but you should keep one paper copy just so you have all the account information if needed right away. Plus like I mentioned with credit cards, it’s a great way to actually SEE what you owe and motivate you to pay if off quicker!
Bills/Utilities: You can keep your utility bills, phone bills, cable bills, etc. in this folder or go completely digital. There really isn’t a reason to keep paper statements on most of these but having one printed statement is good for quick access when needed.
Family Will & Trusts- Put Family wills and trusts into this folder. If you do not have any of these items, I suggest you get them. One product I always recommend is The Money Tools 4-Disc Financial Kit from Suze Orman where she gives you do-it-yourself documents which include a Will, Living Revocable Trust, Advance Directive and Durable Power of Attorney for Health Care!
It is currently available on HSN, and there is a video on it that you can watch (be amazed at the value you are getting), she even gives you permission to share the documents with your friends and family so that they can have these documents as well.
So if you invest in one product this year for your financial future, I HIGHLY recommend grabbing this as it will be the best way to get your families financials organized. Plus it includes so many other items in the kit that it’s a no-brainer. She sells her kit on HSN, and you can check it out via my affiliate link here.
Now if you own a small business you will also need files for that as well in separate folders, it’s important for you to keep them separate especially come tax time.
NOTE: If you currently have everything “paperless” or in an electronic version of a filing system, you can do a paper system as well and just print out your latest statement, etc. and put them in the files as a reference for quick access.
This is also good because if something were ever to happen to you, your loved ones would be able to look at the paperwork as they wouldn’t usually have your Password, etc. to your online accounts.
If you are overwhelmed with paperwork and want to limit the amount of paper you keep in your filing system, consider going paperless for some items like utility bills and use a document scanner to digitize any other statements or receipts you may want to get rid of but want to have a copy of.
What type of system do you use to organize your finances? Feel free to share with me in the comments on this post.