Manage Your Financial Records With These 4 Steps

If you were asked for your vaccination history, last year’s bank statements, or your life insurance policy -- would you be able to easily locate these records? Keeping your important documents organized is essential. Whether you’re meeting with a financial advisor, faced with a health crisis, or there’s a natural disaster, good record-keeping can save you valuable time and stress. But how do you know what to keep and for how long?

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According to a recent poll by the Consumer Reports National Research Center, only 40 percent of Americans think they can find a document at a moment's notice, and only 49 percent can do so with a little looking. And even though 89 percent of respondents said they were extremely to fairly organized when it comes to their financial documents, nearly a quarter had lost or forgotten about an important piece of financial paperwork.

Poor organization of your records can hurt your finances. It can cause you to lose money or incur late fees and interest charges unnecessarily.

Follow these steps to manage your records:

1. Gather important paperwork

Organize these documents into three piles -- active files, dead storage, and items to discard or shred.

Active files According to the government, these records should be included in your active files and readily accessible at home:

  • Appliance manuals, warranties and service contracts
  • Bank statements
  • Bill payment receipts
  • Bills awaiting payment
  • Credit card information
  • Education records, diploma, transcripts, etc.
  • Employment records
  • Family health records, including vaccination histories
  • Health benefit information
  • Household inventory
  • Income tax working papers
  • Insurance policies
  • Loan statements and payment books
  • Password list
  • Receipts for items under warranty
  • Safe deposit box inventory (and key)
  • Tax receipts, such as those received for charitable deductions

Dead storage All papers more than three years old are considered dead storage, according to the U.S. government. Note: this rule may not apply for every document. If you use appliance manuals frequently, they should stay in your active file.

Items to discard or shred Canceled checks for cash or nondeductible expenses, expired warranties, pay stub (after reconciling with W-2) and old records that are out of date or have been replaced by newer versions can be tossed away.

2. Create your filing system

Generally, paperwork that you can keep in a file at home should include all the items you refer to frequently, such as bills and bank statements. Paperwork that’s difficult to replace -- passports, vehicle titles, birth certificates -- should be stored in a location separate from your home file. You might consider a fireproof or waterproof storage or a safety deposit box.

For files you store at home, make sure that one member of the household keeps the documents current and up to date. He or she should develop a routine and a regular filing schedule -- maybe a few minutes each week -- so that your paperwork doesn’t get backlogged. Make sure that each member of the household is aware of where things are stored in case there’s an emergency. You might consider scanning and storing some of these documents online in a cloud system, on a USB drive, or on a website like Legacy Locker or SecureSafe, which securely stores all of your data in a single place.

For more important paperwork -- documents that you can’t easily replace -- you should keep original and official copies in a safe location, like a safety deposit box. If you want to keep these records at home, invest in a fireproof and waterproof safe. If you do store these documents off-site, be sure to make copies that you can keep in a fireproof and waterproof storage at home.

The government says you should keep copies of the following documents in a safe deposit box or locked in a fireproof/waterproof safe in your home:

  • Adoption papers
  • Advance directives
  • Birth and death certificates
  • Citizenship papers
  • Contracts of importance
  • Deeds and property titles
  • Household inventory
  • Life insurance policies
  • Marriage licenses and divorce decrees
  • Military discharge papers
  • Passports
  • Powers of attorney -- be sure to keep a copy somewhere easily accessible as well
  • Social Security cards
  • Stock and bond certificates
  • Wills -- be sure to keep a copy somewhere easily accessible as well

3. Regularly update your paperwork

How long should you keep documents? Here’s a chart compiled with information from the government:

How Long To Keep Important Documents

Document How long to keep
Bank statements 1 year, unless needed to support tax filings
Birth certificates, marriage licenses, divorce decrees, passports, education records, military service records Forever
Contracts Until updated
Credit card records Until paid, unless needed to support tax filings
Home purchase and improvement records As long as you own the property
Household inventory Forever; update as needed
Insurance, life Forever
Insurance, car, home, etc. Until you renew the policy
Investment statements Shred your monthly statements; keep annual statements until you sell the investments
Investment certificates Until you cash or sell the item
Loan documents Until you sell the item the loan was for
Real estate deeds As long as you own the property
Receipts for large purchases Until you sell or discard the item
Service contracts and warranties Until you sell or discard the item
Social Security card Forever
Social Security statement When you get your new statement online, shred the old one
Tax records 7 years from the filing date
Vehicle titles Until you sell or dispose of the car
Will Until updated

4. Create an emergency kit

If there’s a natural disaster like an earthquake, fire, flood, or tornado -- you should have copies of your important documents stored in an easy-to-grab emergency financial records kit. These documents contain highly personal information, so be sure to store your kit in a secure location that you can get to, but that a robber can’t easily reach.

Items you should include:

  • Birth and marriage certificates, divorce decrees
  • Social Security cards of household members
  • Driver's license and other wallet cards
  • Will and/or trust documents; powers of attorney
  • Recent income tax return
  • Passports and/or other identity documents
  • Military discharge papers
  • A list of your prescriptions: name of medication, dosage, pharmacy
  • Contacts for family members, employer, financial advisors, attorney, accountant, and banker
  • Insurance policy information
  • Bank, credit union, and credit card account list
  • Summary of personal, financial, property, and other vital information

You might also consider including:

  • Safe deposit box keys and/or safe combination
  • Computer user names and passwords; CD with relevant personal, financial, legal files
  • Some emergency cash

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