Get Rid of Financial Clutter

turning various piles of crap into an organized system

One of the greatest sources of stress concerns your finances. And so a great way to decrease financial stress is to get your life organized.

With tax time right around the corner, this is a great time to sort through those old files and clear out the ones that you don’t need. Here are four simple steps to help you become better organized this year:

1)  Create a simple budget. Do you know how much money is coming in and going out each month? A simple budget and cash flow document can help you establish order when it comes to your finances. With a better handle on expenses and cash flow, it’s easier to stick to a budget and start the year off financially fit. Documenting your expenses and income also gives you a feeling of control over your finances.

2)  Establish a bill paying plan. Online banking and credit card websites are valuable tools for managing your personal finances. Most banks offer an online bill paying system, which saves time in writing out a paper check for each creditor. This allows you to schedule a monthly or bimonthly block of time to review and pay bills. Automated bill paying also takes away the stress of remembering to pay bills on time.

3)  Keep bill storage simple. All it takes is a large accordion file folder to keep a year’s worth of paid bills. Simply label each of the tabs by month and leave the last one empty for the year’s tax return. Once a bill is paid, file it in the appropriate month along with credit card receipts and bank statements.

An even better solution is to scan and save the documents to your computer and in the cloud with a system such as iCloud, Google Drive, Box, Amazon Storage or Dropbox. This allows you to shred all of the documents as you receive them and de-clutter your home. Saving your documents in the cloud ensures that you can access your information from anywhere, even if you lose your papers or computer in a natural disaster.

4)  What to keep. Toss or shred bill statements that you don’t need for taxes as soon as you have confirmation that your payment is credited to your account. Here is how long you should keep different sorts of documents:

  • One year - Paycheck stubs, utility bills, cancelled checks, credit card receipts and bank statements.
  • Seven years - Brokerage statement, income tax returns, receipts, cancelled checks and other documents for your taxes, purchase confirmation and 1099 forms.
  • Hold while active – As long as they are still valid, keep contracts, insurance documents, stock certificates, warranties, records for property, stocks, pension and retirement plans records. Keep receipts for major purchases such as appliances, autos and furniture for the life of the item, in case you need to file an insurance claim. Also hold on to property tax and home improvement records.
  • Keep forever – Never throw out life insurance policies, wills or mortgage records.

 

photo by: LizMarie_AK

About Maureen Crimmins

Maureen Crimmins is co-founder of Crimmins Wealth Management and a fee-only independent financial advisor. Have a financial question? ASK MAUREEN

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