Staying properly organized from a financial standpoint is not that hard to do, provided that you know how to handle everything. The most important thing is to narrow down what financial record statements you need, which ones you have to keep for a while, and also where to keep them properly.
Why is it important to organize financial records?
It becomes much easier for you to handle stuff when you eventually reach the tax times, so that alone is a major thing to keep in mind.
Additionally, fraud and errors will be harder to notice without organization. But when you are organized and keep everything like bank statements in a single place, it makes everything well-worth the investment.
Also, any big financial decisions will take much longer, which automatically becomes a problem.
Emergencies will help expose the gaps too, something that certainly becomes inherently beneficial.
Understand what you need to keep
The truth is that you never have to keep literally everything. A lot of the time you just need to keep very specific things. For example, stuff that you need to keep indefinitely would be the birth certificate, marriage certificate, life insurance policies, records of major home improvements, retirement account beneficiaries, wills, trusts, powers of attorney, home purchase/sale documents and so on.
You should keep for 7 years things like tax returns and supporting documents, as well as records related to any income underreported more than 25%. Regular tax records can be kept for around 3 years. For a single year you can keep the pay stubs, utility bills, bank and credit card statements, etc. Warranties, insurance policies and loan documents should be kept until they are no longer needed, as that is going to be incredibly handy to have the documents ready to go.
Choose the right storage system
The type of storage system you use will differ based on the situation at hand. The reality is that most people will go with physical storage, because it’s easy to access. A safe is usually the best option in this case for regular people, although a safe deposit box is much better in a lot of cases. And then, there are simple filing systems you can opt for as well, depending on what you need.
Of course, there is the digital storage option as well. With cloud storage being inexpensive, it makes sense to create digital copies of the stuff you want to store. And then you use a cloud storage solution with very good security in place. Keeping a local backup is still ideal, just to be on the safe side. And in these cases, it makes sense to stick with a more consistent file naming system or format, just to be on the safe side.
Protecting sensitive information
No matter if you have mortgage documents or any type of document for that nature, the most important thing is to keep your stuff safe. And that’s why we made a quick list to help you with that:
If you store files digitally, use encryption. It can save you a lot of hassle, and it will streamline the way you manage and handle everything, which is a crucial part of the process.
Shred physical stuff, don’t just toss it. Shredding means you get rid of the documents for good. Tossing them means someone else will be able to find that stuff, and you could end up with leaks or other issues.
Enabling two factor authentication is another major idea to consider. We recommend doing that because you can help streamline things and ensure that even if one of your account info pieces gets leaked, the hacker still requires another part of the puzzle in order to use or see info from that account. Which is great, as it makes the entire process much easier to manage,
Always monitor your accounts as often as you can. Just because nothing bad happened until now, that doesn’t mean everything will be very good all the time. You always want to adjust and adapt, so take that into consideration.
Using unique, strong passwords makes sense. And again, you should consider changing the password from time to time, just to be on the safe side. You never know what issues can arise, so addressing that in a creative manner will help make a major difference in the end.
Create a routine
You need to have a routine when it comes to organizing financial documents. That means having a monthly admin time, doing an annual purge where you remove unnecessary documents and anything of that nature. Plus, it makes sense to keep a financial index document, as it will end up being way harder to manage all your documents in a way that’s professional.
Remember automation, too. These days, banks and utility companies offer you the option to access digital files. And that is a good idea, because it can help you save both time and effort, while also not worrying about any issues at hand that could arise.
How often you need to replace or throw away documents, that is totally up to you. But in the long run, it just comes down to your expectations and what you are looking for. We recommend avoiding any rush, and instead focusing on the process as a whole. It’s a great idea to avoid any rush, and instead streamline your financial records, so you don’t waste any time.
Conclusion
We believe that it’s very important to stay organized when it comes to your finances. At the end of the day, the most important thing is to adjust, adapt and ensure that you are continually offering the best results and quality. Yes, it’s easy when you have just a few documents. But as you accumulate more and more items, it will get much harder to streamline everything, so keep that in mind. It just makes sense to have a fully automated system in place, where possible. And even then, having a way to manually organize everything using a system that works well, that is a game-changer.
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