By Connie Schlosberg
I’m going to tell it to you straight: organizing your finances is a hassle. Each month, you get sent dozens of bills, statements, and other financial documents via email and online. It’s daunting. If you’re a disciple of the Marie Kondo method, you know you shouldn’t keep anything if it doesn’t “spark joy.” I don’t think anything about finances “spark joy” for me. Nonetheless, you can apply a minimalist attitude to get financially organized that’s easy and relatively painless. This system helps you to find your financial documents quickly. The best thing about this system is you can do it in less than an hour to streamline your financial life.
I use File Manager for my financial documents, but any digital file management program will do. But make sure you backup your files daily whether you use cloud storage or an external backup device. The first thing you want to do is create a folder dedicated to your financial documents. Label it “My Finances” and password protect it if you share your devices with others. Here are the folders you should create within your “My Finances” folder.
Digital Financial File Folder System
Checking and Savings Accounts
Keep your monthly bank statements here with a separate folder for each bank account. You only need to keep statements for a few months, no more than a year.
Create folders for each credit card you have. Keep the monthly statements and any correspondence on interest and fees. For more information on managing credit card debt, read these articles.
Keep your loan agreement and payment records for each student loan you have. Also, retain any important messages such as interest rate notifications and requests for deferrals and IBRs.
Keep your statements, payment receipts, and payment plan agreement for any medical debt that you are paying back on time.
Keep your loan agreement, payment receipts, and any important documentation on your car such as warranties for each auto loan you have.
You should create a folder for each retirement account you have. Keep your quarterly statements. If you have an employer retirement account, you should keep your sign-up package because it contains the investment options you have. (By the way, you don’t need to keep the prospectus the mutual fund companies send you each quarter.)
Keep your most recent social security benefits statement in this folder. If you haven’t signed up for online statements from the Social Security Administration, request it by going to www.ssa.gov.
This folder is for every statement you received related to any investments you may have such as stocks, bonds, and mutual funds that are not retirement accounts. Create a separate folder for every brokerage account you have.
Create four folders within the Tax Returns folder. Three folders will include your last three tax filings and one folder will be for the current tax year. In each tax year folder, include all that year’s tax documents such as W-2s, 1099s, receipts to support deductions, and a copy of all tax returns filed for that year. According to the IRS, you don’t need to keep tax records for more than three years. However, you should keep records for a longer period for these transactions: home sale/purchase, stocks, bonds, IRAs, 401Ks, rental property, and any businesses that you own. I keep my tax documents for 10 years, but that’s my choice.
If you own your own home, create a folder for your sales agreement, title, and title insurance. Another one for insurance policies. Also, create a folder for home improvements. Keep all your receipts for home improvement for as long as you own the house. You will need these receipts when you sell your home for tax purposes. Create another folder for your home mortgage and line of credit where you’ll save your mortgage statements and loan information. If you rent, create a folder for your lease, security deposit receipt, and payment receipts.
Create a separate folder for each of your insurance policies: health, life, auto, homeowners and renters’ insurance, and disability insurance. Each folder should contain the appropriate policy and payment records.
Will and Trust
This should hold a copy of your most recent will along with the name and contact information of the attorney who drafted it.
This folder is for your most recent credit report and score. Better yet check out Credit Karma. It’s free.
Which records should you keep, and which can you delete?
Being a packrat digitally is even easier than IRL. We keep too much info for way too long. Mea culpa!
As I mentioned above, you only need to keep tax records for three years. You should keep records that pertain to your home and investments for as long as you own them. This includes your retirement accounts, insurance policies, mortgages, and loans.
But don’t hang on to anything else for too long. I’m sure none of those documents “spark joy.”
Here’s a list of documents you should delete.
- Credit card statements for closed tax years
- Canceled checks for closed tax years
- Canceled insurance policies
- Old financial securities statements (e.g., stocks) for closed tax years (unless they have cost-basis information)
- Annual reports from stocks and mutual funds
- Outdated documents (essentially any document that either expired or is replaced with a new document)
Now you should be financially organized. Do you feel empowered? Hopefully, you feel more in control of your finances. This is the first step to taking your financial life back. The next one is figuring out where you stand financially. DebtMD has a free tool to help you analyze your debt. Check it out here.
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