Are You Keeping Good Financial Records?

How organized is your home? I don’t just mean “Are your recipes in order?” and “Do you separate your laundry by color and weight?” I’m talking about your household records and finances. Do you have a system for your important papers? Do you have a budget or a financial plan for your household? If these questions sound a little overwhelming, don’t panic. If you don’t have these systems in place, it’s never too late to start.

I want to preface this list of tips with a friendly reminder that all households have different record and financial management systems in place. What’s great about these types of systems is that you can personalize them to suit your family’s needs. If you don’t have a family now and you set up your own system, you can always change it later as your life changes.

Below are some tips to help you implement a record and financial system that will aid (not hinder) your family’s progress and needs for the future.

#1) Keeping the Right “Kind” of Files

When you go through your important documents, file the papers into three boxes (an active file, long term storage, and shred). Seems simple enough, right? It’s not until you start looking at documents do the problems arise. Particularly, “Am I supposed to keep this?” The items that you should have in your “Active” file are those that you need readily accessible. Mainly:

  • Appliance manuals, warranties, and service contracts: I keep all of these in a binder – slipped into sheet protectors to help keep them organized.
  • Bank statements: Filed away by date.
  • Bill payment receipts: This means utilities, credit cards, loans, and other types of bills that you get in the mail.
  • Bills that need to get paid: I set these on top of the “Bill Payment File Box” which has stamps, extra envelopes, account information, extra pens, a calculator, and a check register.
  • Credit Card Information
  • Education records and transcripts
  • Family health records
  • Benefits information: Including health benefits
  • Income Tax working papers: I keep three year’s worth in my active file (in case of audit) and file everything else away in long term storage.
  • Insurance policies
  • Encrypted password list
  • Receipts: I only keep the big purchases that are still under warranty, and the receipts that I use for tax purposes

#2) Scanning & Storing Files Electronically

Scanning your documents into your computer can be a tedious process. However, it is handy to have back-up copies on an external hard drive. It makes it easy if you get audited. It keeps the clutter down to a minimum and you can even put nearly everything into long term storage. Make sure to hold on to the hard copies in case of a computer crash or some kind of electronic disaster.

#3) How Long Do You Keep These Files?

This all depends on what kind of files they are. Tax files should be kept for seven years. Small bills can be shredded after just one year. Large bills should always be kept. After a few years, put them in long term storage. Receipts (like credit card and debit card receipts) should be kept until you can verify the purchases on the statements. After which, you can shred them. The only exception to that is when they are tax-related. Those should be kept for three years.

Keeping good financial records can help you monitor your business, plan for the future, and set goals for you and your family. Keeping accurate financial statements is important for verification in case you have to battle a disaster like identity theft.


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