5 Easy Ways to Organize Your Financial Documents

An important part of managing your personal finances is keeping your financial records organized. Having disorganized financial documents is not only stressful, but they can also actually help drive you deeper into debt. You are more likely to miss payment deadlines, continue poor spending habits, and save less. There are easy ways out there to organize your financial documents. 

When your records are organized, you will know exactly where everything is and will be able to find it quickly, and it’s unlikely that anything will be misplaced or lost.

You’ll also have an easy way to locate important documents quickly, especially in an emergency situation.

What Should you Keep?

One of the first steps in taking the time to organize your financial documents is determining, “Why do I need to keep this?” Documents you should keep are likely to be those that are difficult to obtain, such as Tax returns, Legal contracts, Insurance claims, and Proof of identity.

On the other hand, if you have documents and records that are easily duplicated elsewhere, such as online banking and credit card statements, you probably do not need to keep paper copies of the same information.

How Long Should you Keep Your Records?

Generally, a good rule of thumb is to keep financial records and documents only as long as necessary. For documents that are legal in nature and/or difficult to replace, you’ll want to keep them for a longer period or even indefinitely.

The IRS generally recommends that taxpayers keep federal tax returns and supporting documents for a minimum of three years up to seven years after the date of filing. Certain circumstances may even warrant keeping your tax records indefinitely.

5 Easy Ways to Organize Your Financial Documents

Becoming an organized person is not simple, but taking the steps necessary to get your financial records organized is a task with many rewards. With organized records, you can find documents easily, handle tax disputes with confidence, document ownership of specific assets, potentially save money on taxes, and help others handle your financial affairs, if necessary.

So are you ready to clean up your financial records? Here are five steps to get you started:

Review the Documents You Have

Before you can get started organizing, you’ll need to know exactly what financial documents you have. Looking through your files will help you discover things you may have missed that could save you money. 

While you’re sorting your paperwork, you should divide them into different categories. This will help with creating a new filing system. Below are few categories I use personally:

  1. Financial Management – bank statements, credit card information, loans records
  2. Investments – stocks and bonds, IRAs, savings bonds
  3. Income Tax Information – tax returns, supporting
  4. Insurance and Annuity Documents – original policies and recent statements
  5. Estate Documents – wills, powers of attorney, trusts, living wills
  6. Legal Documents – real estate settlements, birth/marriage/divorce records, passports
  7. Medical History – doctors, current medications, allergies, summaries of recent appointments

Determine Your Storage Methods

Please stop tossing all of your receipts, records, and bills into a giant pile. It increases the chances you’ll forget to pay them on time. To better organize your bills and financial records, consider using a digital filing system, or you can simply use traditional file folders or stackable drawers. I use a combination of both online and file folder methods. 

After you have divided your files into categories and recorded all of your accounts, now you can lock it down. The goal is to have all this newly organized financial information accessible to you, and your loved ones.

Use a Financial App to Manage Your Finances

The more organized you are, the better grasp you’ll have on managing your finances. If you don’t understand all the pieces involved, it can be a challenge to comprehend where you stand and what direction you need to go. Using financial tools such as Mint, can help you get a better handle on the scope of your finances.

Mint allows you to set goals, create a budget, monitor your spending habits, and calculate the correct savings rate to reach your version of financial success. 

Shred Documents

By throwing personal documents out in the trash before shredding them, you run the risk of someone finding your personal information. This puts you at a greater risk of identity theft. It’s best to avoid that at all costs by shredding your documents before getting rid of them.

If you have too much information to sit and wait at a shredder, you can use a professional shredding service. Some are mobile and will come directly to you. 

Maintain Your Storage System

Creating a filing system is only the first step; next comes maintenance. Stay committed to your organization system and schedule time each month, quarter, or year to get rid of outdated files, add new ones, etc. You could also include financial decluttering and organization in your spring-cleaning process so you don’t fall behind.

Bottom Line

The hardest part is actually getting organized. Once you manage to do it, it’s much easier to stay that way!

Once you have conquered how to organize your financial documents, make it a habit! Stay organized consistently, as documents come in toss or shred anything that isn’t important and doesn’t need to be kept.

Are there any tips you would like to share with other readers when it comes to getting and staying organized? Leave a comment below to share some of your tips and experiences related to organizing personal documents.