Organizing Your Documents Without Breaking The Bank

Piggy Bank with DollarsIf your tax returns, bank statements and old bills are piling up in a corner of your kitchen, it’s time to purge. Organizing financial documents will save you time and budgeting your allowances will save you money, so get cleaning this summer. Here are some financial tips and tricks for saving money, budgeting and how to file your statements and documents.

How should someone organize financial papers and information from the past 5-7 years?

When people talk about keeping financial papers for up to seven years, they are generally thinking of their tax returns. In a perfect world, it is best to scan everything to a cloud service, which allows you to access them at anytime, and easily transmit them.

If you prefer to keep hard copies, keep each year’s return in a large envelope (marked with the tax year) along with back up material, including receipts, and store them in a locked file cabinet.

While the IRS won’t require that you keep your returns more than seven years, keep an electronic version of the return itself indefinitely, since it might be the only documentation you have for information.

What is the best filing system?

For financial documents that you plan to keep indefinitely, the best filing system is a digital one that is backed up to a cloud service, because the information is secure and can be accessed from anywhere.

What should people keep and throw away?

With the click of a mouse, you can access anything from canceled checks to brokerage statements to utility bills so keeping these things is no longer necessary. If you still receive paper bills, they can be shredded after they are paid. Hang on to year-end brokerage statements, which consolidate important information from the past 12 months.

Keep information digital or paper?

For people who are ready to go digital, scanning papers and backing up files is the best way to go. It ensures that important papers are safe from a home flood or fire. It also reduces paper clutter.

To shred or not to shred?

Err on the side of caution and shred everything that has sensitive information, such as your social security number, date of birth and account numbers. A cross cut shredder is preferable to one that shreds in strips, which can leave important information intact for identity thieves.

How can you organize your budget and stick to it?

One of the most popular budgeting programs ( aggregates information from all of your accounts, allowing you to see everything that is coming in and going out.

For people who prefer not to give out their passwords, spreadsheets and old-fashioned notebooks work too. People on a tight budget might prefer an envelope method, which involves divvying up a month’s worth of cash into different envelopes for each spending category.

Find a system that is simple enough to stick with over time and make sure that you track every dollar you spend.



Lynn Sherman has been a personal finance writer for more than 15 years. She lives in West Hartford, CT.

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