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Steps For Organizing Personal Finances

Simple Steps For Getting Your Personal Finances in Order

Do you feel unorganized when it comes to your personal finances? Our friends at All You are here to help with that. Check out their step-by-step instructions and tips for getting your finances in order.

Taking care of your family finances is like having your own business: you need to have a simple system in place and then follow it to make sure everything runs smoothly. Fortunately, all it takes is a bit of organization and the commitment to stay on top of it. The rewards are enormous — you won't be drowning in a sea of papers each month, and you'll save yourself a lot of stress.

STEP 1: Sort through your papers

Deal with the bills, statements, receipts and other notices that stream in by learning what to keep — and for how long.

You don't need to keep every piece of paper for posterity. Know what to file away and what to shred — and when. To begin, gather all the papers piling up on your kitchen table, in your purse and in assorted drawers and separate them into the following four categories:

1. Hold for ONE MONTH

Keep these papers, and at the end of each month check them against your monthly statements. Then it's OK to toss them.

• All receipts for everyday purchases (except those saved for tax purposes)

• ATM and bank slips

• Credit card receipts

2. Hold for ONE YEAR

Arrange the papers in separate files labeled income, expenses, home, investments, etc. Toss them when you get your annual statements or W-2 tax forms (1099 if you're self-employed).

• Paycheck stubs

• Monthly bank statements

• Mortgage bills

• Phone and utility bills

• Processed checks

• Investment quarterly reports

• Medical bills

3. Hold for SEVEN YEARS

The IRS can audit you going back seven years, so these records could come in handy.

• All tax-related records and receipts, plus a copy of the actual return

• Annual credit card statements

• Checks and receipts for business deductions

• Retirement account contributions

• Charitable donations

• Child-care bills and medical expenses

• Mortgage interest and property tax payments


Hang on to these papers indefinitely, or until you sell the item purchased or stop using the service.

• Medical info (copies of insurance cards, doctors' numbers, prescriptions, surgery records, health-care power of attorney and other information)

• Past tax returns

• Insurance policies

• Investment purchase and beneficiary records

• Wills and records on beneficiaries and trusts

• Home deed

• IRA nondeductible contributions (to prove you paid tax on the money)

• Loan agreements, stock-purchase agreements, pension-plan and retirement-plan documents

• Receipts and warranties for big purchases (anything that would cost more than your insurance deductible to replace)

• Credit card agreements

• Brokerage annual statement

• Automobile papers

• Home improvements (for buyers)

• Birth, death and marriage certificates; passports; social security cards; college transcripts and diplomas; divorce decrees; adoption and child-custody papers; prenuptial agreements

• An inventory of every valuable item in your home (update this as necessary)

Avoid identity theft: don't just throw away papers that contain personal information; instead, pass them through a paper shredder (available at any office-supply store; prices start at about $25).

STEP 2: Set up a financial office space

Once your important documents are organized, find a place to manage them. Then use a simple system to keep everything in order.

Maintain traffic flow

Keep up your system with minimal time investment. A few minutes a week, and half an hour or so each month and once a year, will keep you organized and uncluttered.

• Weekly: sort the papers and receipts you've collected into their proper folders.

• Monthly: balance your bank and credit card statements by checking them against your receipts. Purge the receipts when you're done. Pay bills and balance your checkbook.

• Yearly: Check your monthly statements and bills against yearly statements. Sort out and throw away what you don't need, and save everything else for tax time.

Streamline your system

Consider these ways to make handling your money matters even more convenient:

• Automate payments on bills and credit cards so you'll be free of deadlines, penalties and late fees. Many utilities and banks offer this service.

• Pay bills online when you can — it's faster than the mail and you save money on stamps.

• Check out money-management software, such as Quicken, which can download your bank statements, help you budget and create practical reports on your financial situation.

• Get help from the kids, who like to sort and shred.

• Reexamine your system every year to address any changes in your life and adjust your paperwork accordingly.

Get smart about space and place: dedicate specific spaces to your finances, and get rid of the shoe boxes under your bed. You'll need:

• A drawer, cabinet, lockbox or other container to safely store your paperwork. A fireproof in-home safe is also a good idea for long-term papers.

• A desk or table where you can do your monthly paperwork. Be sure to keep this area clear of clutter from other projects, magazines, the kids' homework, coupon clippings, etc.

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