Your Guide to Organizing Financial Documents

Your Guide to Organizing Financial Documents

It’s possible you haven’t even attempted your Financial Filing System because the overwhelm is too much. You have so many documents, virtual and in print, and you don’t know how to determine what to keep and what to toss. If you’ve let the lack of organization go too long, it’s time to get it together. 

The CGS Team is sharing our tips for organizing important documents, including what to keep and what to get rid of, and how to keep the organization going long after your first clean sweep.

#1 Set small, manageable goals

Thinking you can tackle your entire mess of documentation in one setting is a recipe for disaster. Midway through, the overwhelm will start to take over and you may quit altogether. Start by setting small, manageable goals and tasks. Here are a few examples:

  • Organize one or two boxes of paper work
  • Clean out the section of your closet loaded with papers
  • Organize old tax documents, starting with the oldest year you have

Keeping your tasks small will allow you to focus on getting them done in one sitting. You can always move on to more tasks the next day, week or month.

#2 Know your document timelines

Before you get excited and toss everything, it’s important to know how long to keep certain important documents. Once you’ve reached the timeframes specified below, feel free to throw out anything that may have expired.

Toss after 1 month: Utility and monthly bills, bank deposit and withdrawal receipts.

Unless you are self-employed and need utility bills for tax purposes, you can toss your bills after the payment has been processed. You can also get rid of bank deposit and withdrawal receipts after confirming they are showing on your monthly statements.

Toss after 1 year: Monthly bank statements, pay stubs.

According to Better Money Habits, “Keep either a digital or hard copy of the past years’ worth of your monthly bank and credit card statements. You should also hold on to pay stubs so that you can use them to verify the accuracy of your Form W-2 when tax season arrives.”

Toss between 3-6 years: Tax supporting documentation.

The IRS recommends people keep supporting documentation for as long as they can be audited and liable for changes. The IRS says they can audit back as far as 3 years, however if a “substantial error” is found, they can go up to 6 years or more.  Keep payroll records and other important documentation for 3-6 years until you are in the clear.

Keep forever: Tax returns, major financial documents.

Tax returns, legal filings, inheritance and other important documents should be kept for your lifetime. Store them some place safe.

#3 Toss duplicate documentation and back up your documents

If you have the same document in print and electronic form, get rid of the print document. Most banks, brokerage institutions, and 401k providers keep electronic copies of statements, notices and account disclosures. Check with them to see how long they keep records of their copies. If there is an important document that expires from their electronic library, keep it in print form.

You should also make it a habit to “back up” any electronic documentation. Save it to a cloud server or a physical hard drive. If something happens to your primary computer, you don’t want to worry about your important documents being lost forever!

Before you back up, create folders as specified in the How to Set Up a Financial Filing System article so your documents are organized.

#4 Don’t just throw out documents, shred them

By throwing personal documents out in the trash before shredding, you run the risk of someone finding your personal information. This puts you at a greater risk of identity theft. It’s best to avoid that at all costs by shredding your documents before getting rid of them.

If you have too much information to sit and wait at a shredder, you can use a professional shredding service. Some are mobile and will come directly to you. This is a good option if you want to ensure everything is taken care of right in front of you.  You can also visit an office supply store, most of them offer shredding services. Check out 5 Ways to Avoid Financial Fraud!

#5 Audit your bank accounts

Every year you should complete an audit of all your accounts. Are there accounts just sitting empty with no activity? Are there accounts where you are being charged fees? Close any account that hasn’t been used or you no longer intend to use it.

If you are being charged fees for any checking or savings accounts, close them. There are plenty of options available to you that don’t require paying fees. Make sure you shred any checks or unimportant documents associated with the closed accounts.

#6 Make organization a habit

Once you have conquered organizing all of your financial documents, make it a habit! It likely took a lot of work to get you organized, so spare your future self the hassle by staying organized consistently. As documents come in, refer to the expiration time lines above. Toss or shred anything that isn’t important and doesn’t need to be kept.

Also, avoid duplication of copies by opting for electronic documentation of all your accounts. If you’re worried about online security, read Financial Security: Keeping Your Info Safe. There are plenty of options that will keep your private information safe and secure.

As we mentioned earlier, the hardest part is actually getting organized. Once you manage to do it, it’s much easier to stay that way! Have you conquered organizing all of your important documentation? Are there any tips you can share with other readers when it comes to getting and staying organized? Leave a comment below to share some of your tips and experiences related to organizing personal documents. We love to hear what our readers have to say, so don’t be shy!

-The CGS Team

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1 thought on “Your Guide to Organizing Financial Documents”

  1. Such a great read! Sometimes I struggle with throwing important papers out, so it’s nice to have a general timeframe in mind for moving forward. I also need to invest in a shredder!

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