Barbara O’Neill, Ph.D., CFP® Extension Specialist in Financial Resource Management Rutgers Cooperative Extension
Deluged with financial “paperwork” (investment account statements, tax records, and important correspondence such as a certificate of deposit (CD) rollover notice)? You are not alone. Many people report having difficulty managing their financial records and physical symptoms of stress because they feel disorganized. What to do? Make the time to clear the clutter and develop an efficient financial record-keeping system that works. Organizing financial records may not be the most exciting way to spend a day, but the rewards are worth it. With organized records, you can find documents easily, handle tax disputes with confidence, document ownership of specific assets, potentially save money on taxes (e.g., capital gains tax calculations), and help others handle your financial affairs, if necessary. Consider the following eight small steps to get your financial house in order:
- Designate a Record-Keeping Location - Use a two-drawer filing cabinet or deep desk drawers. Invest a few hours to set up an organized filing system so you can find things when you need them and have a place to put tax receipts and important family records. Handle your mail once and file, shred, or act on financial documents as they arrive instead of laying them aside in piles.
- Purchase Filing Materials - Use plain manila folders, hanging file folders, and/or accordion files. Many office supply stores also sell financial record-keeping system products with customized file folders for household expense categories and types of filed documents (e.g., insurance policies).
- Categorize Your Records - Separate active records from inactive (archived) documents you will keep a long time. Active Records include bank and investment account statements, insurance policies, medical records, and warranties. Inactive Records include real estate documents, Social Security information, retirement savings statements, and copies of wills.
- Rent a Safe Deposit Box - Store securities and documents that would be difficult to replace (e.g., birth and marriage certificates, car titles, stock and bond certificates, adoption papers, burial plot papers, and auto titles). Another option is to buy a fireproof home safe to store valuable papers.
- Back up Your Taxes - Keep receipts and records relating to entries on a tax return for at least 3 years after filing (6 years is better). After taxes are filed, place all supporting documents for each tax year into a single large envelope or accordion file folder. Save records related to capital assets, such as a house or investments such as stock or mutual funds, for as long as you own them plus at least six more years.
- Know What Goes - Shred reconciled bank deposit and withdrawal slips, paid utility bills, expired warranties and service contracts, credit card slips after reviewing your billing statement, and ATM receipts and deposit slips after transactions have been shown correctly on a bank statement.
- Create Investment Files - Start a file folder for each stock, bond, or mutual fund that you own. Save year-end account statements that list periodic deposits and investment earnings as well as the most recent prospectus or annual report. By having all your investment purchase information in one place, the cost basis of shares can be easily determined for future capital gains tax calculations.
- Consolidate Your Financial Information - Prepare a consolidated list of financial assets, debts, insurance policies, contact information for financial advisors, and other important information. Then share a copy of this document with your loved ones and the executor of your will. A form for recording important financial information can be found at http://njaes.rutgers.edu/money/pdfs/importantpapers.pdf. A form for recording all of your digital assets is available at http://njaes.rutgers.edu/money/pdfs/Digital-Assets-Worksheet.pdf.