We know what you’re thinking. Keeping your financial records organized isn’t exactly the most exciting task. Still, it’s absolutely crucial for maintaining your overall financial health. With a record number of Aussies confused by their finances, today is the best day to get started.
Whether you’re preparing for tax season, applying for a loan, or just want a clear picture of your finances, it pays to be nice and tidy with your financial records. In this guide, we’ll break down the practical tips you need to get your financial records in order.
1. Determine What to Keep
To start, how do you know what to keep and what to get rid of? It’s intimidating to organize your financial records, especially if you’re worried you might accidentally throw away something important.
Here’s a quick guide:
- Keep indefinitely: Birth certifications, marriage licenses, divorce papers, citizenship documents, and military discharge papers
- Keep for 7 years: Tax returns and supporting documents, property records, and loan documents
- Keep for 1 year: Pay stubs, bank statements, and credit card statements
- Keep until tax season ends: Monthly bills and receipts
Remember, most companies and banking providers offer electronic statements. You can opt for these to reduce paper clutter.
2. Create a Filing System
Now that you know what to keep, let’s create a filing system. This can be a physical cabinet, digital folders, or a combination of both.
For physical documents, a filing cabinet or a set of file boxes keeps everything in one space. You can use hanging folders for broad categories (‘bank statements,’ ‘taxes,’ ‘insurance,’ etc.) and smaller folders for subcategories.
For digital documents, you can follow a similar structure on your computer. Use clear, consistent names so they’re easy to search later.
Lastly, make sure someone close to you knows how to understand and use your filing system. If something happens to you, this will make sure they can access key personal and financial documents.
3. Go Digital
We’re in the 21st century, remember? Consider digitizing your paper documents. This saves space, and it’s also easier to search and access.
You can digitize your existing paper documents with a scanning app on your phone or a traditional scanner. Save them as PDFs to your device and organize them in your digital filing system.
However, make sure you backup your digital files regularly. You might choose a secure cloud storage tool or an external hard drive, but make sure you have a way to keep your documents safe in case something happens to your device.
4. Set Up a Bill-Paying System
When it comes to staying nice and tidy with your financial records, you need a system for paying bills on time. You might have a physical inbox for incoming bills, or you might set up a digital calendar with automated reminders when bills are due.
If you’re concerned about late fees, set up automatic payments for regular bills. Just be sure you always have enough funds in your accounts to cover your bills to avoid overdrafting your account. Finally, keep a log of bills paid, including the date, amount, and amount of payment. Not only does this keep you organized, but you can easily resolve any potential disputes in the future.
5. Organize Your Receipts
We all have a junk drawer that has a mess of receipts, right? Or maybe it’s an envelope or your purse? Either way, you need a better system for managing receipts. This is even more essential if you’re a business owner or you’re planning to claim deductions on your taxes.
The simplest way to organize your receipts is to have an envelope or folder for every month. Put all of your receipts for the month in that envelope, and file it away for tax season. Another option is to create a digital folder in your email account specifically for receipts.
6. Secure Important Documents
Not all documents are created equally. Some are irreplaceable, like birth certificates, passports, and ID cards. Consider storing these in a fireproof safe at home or in a safety deposit box at your bank.
For digital documents, add a secure password and encrypt any sensitive files. Most providers nowadays require two-factor authorization, so make sure this is enabled to keep your data secure.
7. Regular Maintenance
Set aside time regularly, perhaps monthly or quarterly, to review and update your financial records. This is when you can shred documents you no longer need, file new ones, and back up your digital files.
This is a time to review your overall financial picture. Is your budget on track? Do you need to adjust your savings or investments to meet long-term goals? Regular chains are the best way to stay on top of your finances and catch issues early.
Daunted by the idea of organizing your financial records? Remember, there’s no one-size-fits-all approach. The key is to find a system that works for you. It’s okay to start small if you need to. Even organizing one category of documents is a step in the right direction.
Feeling overwhelmed by your financial records or need help creating a system that works for you? We’re here to help. At Debt Busters, we support you in every aspect of your financial life, including organization. Contact us today for a personalized plan forward.