Fall - A Great Time to Organize Your Finances

     
Here's an excerpt from an article by Erin Baehr, a financial planner on how to organize your finances. Be inspired!

"There's something energizing and motivating about this time of year.

The dog days of summer are coming to an end and there's a chill of fall in the air in the mornings. Even without any kids in school anymore, seeing all those school supplies on sale gets me in the mood to organize.

It feels good to clean out and get a fresh start for the fall. So in the spirit of 'back to school,' here are some tips to get financially organized.

Everything has a place

Brainstorm to come up with a system that will work for you and your life. It makes no sense to set aside a place in a corner of the house with a beautiful filing system if you know you really won't get up there to use it. I don't know how many times I've set up the 'perfect' system, only to find in the chaos of life that it was impractical.

If papers seem to always get dumped in one place in the kitchen, go with that, and set up your system there, at least as a temporary stop in the filing chain. It has to be workable for everyone or it won't happen. Use a dedicated color coded pocket folder for each child to deposit his school papers and keep track of papers that need to be returned, for instance, and others for family business, including mail to sort through, bills to pay, and things to be filed.

On a regular basis, set aside time to transfer to your 'real' files. I love the 'Everyday' file sorters that have tabs for each month, and also tabs for each day of the current month in the front. It's a great way to tuck away something you'll need in a few months and not forget about it. Workflowy.com is a nice (and free) online to-do list tracker, too.

Get the right stuff

School supplies aren't just for kids. Having the right tools for the right job makes a difference and now's the perfect time to shop the sales and scoop up the deals. Look for the bargains on folders, binders, pens, notebooks, and don't forget the box of crayons (coloring is a stress reliever) yo0u can buy discounted to a penny in some office stores.

Be sure to have a healthy supply of hanging file folders on hand. If you don't have a filing cabinet, look for a used one on Craigslist, garage sales, or the local Facebook yard sale pages. I've found several sturdy, locking file cabinets at bargain prices that way.

What to keep, what to purge

Again, you'll want to set up your files in a way that makes sense to you. Simple is better. I like to have a file for the current year, and then thin out and transfer to the permanent file at the end of the year. Some topics to have in your current files include: bank statements, credit card statements, medical bills and insurance statements, employment benefit information, pay stubs and income statements, investment statements, retirement account statements, auto receipts, home improvement receipts, insurance (home, auto, life), utilities, mortgage statements, tax documents (including the relevant credit card statements, canceled checks, tax bills, or receipts for things that you will need for your taxes).

At the end of the year transfer to permanent files those that will continue to be relevant, such as bank statements with canceled checks to prove a purchase or tax deduction, any non-retirement investment statements that show purchases, sale, or reinvestments (to prove your basis later), major home improvement or repair receipts, auto repair receipts for cars you still have, auto and home insurance declaration pages for one year prior, life insurance papers and medical bills relevant to a current illness, insurance claim, tax deduction or flexible spending reimbursement.

Pay stubs can be destroyed after comparing to your W2 at year end, and the same goes for mortgage statements — once they're matched up to your 1099 in January you can destroy them. You can destroy other records that you don't care to keep for tracking purposes, like utility bills to compare year to year or employment benefit booklets.

Your permanent files should include: product manuals, education and employment records, prior year tax returns, medical histories, warranties and related purchase receipts, safe deposit box inventory list, password list, loan documents, pension and retirement benefit estimates, Social Security statements (note: Social Security no longer mails statements; you can get yours online at www.ssa.gov).

Important documents such as password lists, car titles, birth certificates, and social security cards should be kept locked up in a fireproof, waterproof box or in your safety deposit box. Wills, advanced medical directives and powers of attorney should be kept in the fireproof safe also, with copies given to the appropriate, trusted parties.

A common question is how long to keep tax records. The IRS can audit your return for up to three years, so you'll want to keep them at least that long. However, if you grossly underreport your income (by at least 25 percent of what is on your tax return), they can go back six years; for fraud or not filing a return, they can go back indefinitely.

Records for worthless securities should be kept for seven years, and you should keep records for amended returns for three years from the date you originally filed or two years from the time you paid any additional tax, whichever is later. It's important to keep your documentation organized from year to year; it's easier to file carefully now then recreate records in the event you are questioned about a deduction.

Develop a master list of where each type of document is kept, and a snapshot of your assets and liabilities. Storing your files electronically is okay, too, as long as you have a secure place to keep them, where they are protected from data loss and theft. Communication with others on your financial team, like your spouse or executor, is important as well. The more organized you are the easier it will be to help you in the hopefully unlikely event of your incapacitation or death.

Shred it, don't forget it

To protect your identity, be sure to shred your old documents rather than tossing in the trash, either with a shredder or a shredding service. ...

Keep it up

Even with a system that works for you, you'll have times that things get sloppy. Life just happens that way. So take advantage of the energy that the crisp fall air brings and do some pruning. You'll be glad you did."

More on organizing finances:

How Quickly Could You Evacuate?

Managing Paper

Organizing Tax Receipts