Keeping your finances organized can help you stay on budget and keep track of your spending. It can also be a daunting task if you haven’t been organized all along. Many people plan to organize their finances, but never seem to get around to it. The idea of digging through all of the documents from previous years and sorting it neatly can be overwhelming. If you have been putting off financial organization, this is the perfect time to tackle the beast. Since you have to put your taxes together anyway, why not take a little extra time to put it all together in an organized fashion?
How Organization can Save you Money
Getting organized will do more than make your office look nicer. When you can quickly put your hands on any financial document you need, you can easily keep track of what you spend every month. Just organizing your incoming and outgoing bills can save you a ton in potential late fees. It can be satisfying to see the piles shift from what is due to what is paid as the weeks pass, too.
Filing the Paperwork
The best way to begin organizing your finances is to create a reasonable filing system. You don’t have to sort your files according to some master plan. Just make sure the filing system makes sense to you so you can find documents you need later. Treat yourself to some new file folders and colored tabs so your filing drawers look nice and fresh for the project. However you organize the files, you need a place for receipts, tax related documents, bank statements, invoices, insurance policies, and anything else that provides important financial information that you should keep.
Consider Digital Options
Many banks and creditors are moving to electronic delivery for their services. It is possible to receive almost every monthly bill through your e-mail. If your bank provides online banking, you can set up digital payments for most of your bills. Online banking is a nice backup system for keeping track of expenditures on a regular basis. It also cuts down on the amount of paperwork you need to file in your home office. Depending on your bank, you could store all of your statements in your own personal online account and never have to receive another paper copy in the mail.
What to Keep and What to Toss
Different financial documents need to be kept for different amounts of time. The IRS recommends that you keep your tax returns for at least seven years. If you are ever audited, the agency will want to be able to look through your tax returns from the last three to six years. Mortgage documents should be kept for the entire length of time that you own your house. Everything you sign during the closing procedure contains important information regarding your home ownership. Bank statements and account information can be thrown away on an annual basis. Receipts and bills should also be kept for a year before they are thrown away.
Safety Issues
Identity theft is a very real danger in this digital age. You can protect yourself against identity theft by shredding every document before you throw it out. Anything that lists your name in conjunction with a social security number, account number, or credit card number should be destroyed. Keep your documents in a filing cabinet that is rated to withstand water and fire damage if possible. Online information should be protected by a secure password that is changed once every six months.
Easier to Maintain than to Start Over
While you are getting more organized, try to arrange things in a way they will be useful during the year. Maintaining your organization will be much easier than trying to organize the whole thing every year. Keep filing cabinets easy to access and don’t let them get overstuffed. Create a place for incoming mail and bills that you will use in a natural manner when you bring the mail in every day. If you can be disciplined enough to put the paperwork away as soon as it comes in, you will never have to go through the trouble of this big organization process again.
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