If your financial life is confined to boxes, file cabinets and various piles of statements and receipts that only you can navigate, it might be time for a little de-cluttering.
Software- and Internet-driven advancements in money management not only provide paperless alternatives to planning and tracking savings, spending and investments, they make finances easier to handle in an emergency. If you’re thinking about resetting your recordkeeping, here are some steps to get started.
Think about financial goals first. Before tackling the job of reorganizing your financial recordkeeping, think through your current financial objectives and what changes might give you better data and efficiency to achieve them. You might want a system that tracks spending, saving, budgeting and on-time debt payments. If you already have that system in place, you might want more detailed information on retirement or your child’s college fund. Consider involving your financial and tax advisors in the discussion and see what suggestions they have.
Create a system that makes it easy for loved ones and financial professionals to help in an emergency. If something were to happen to you, could a loved one easily navigate your finances? When organizing, always keep your spouse, children and/or executor in mind. Consider creating an ICE file, short for “In Case of Emergency,” and let your representatives see it in advance. On paper or on a computer document or spreadsheet, your ICE file should be a handy guide or index to find the following quickly:
Contact information for doctors as well as financial and tax advisors
Locations for all essential estate documents including your will, your health and financial powers of attorney and any letters of instruction you have written to accompany these documents
Contact information and statement access for all savings, investment and debt accounts, particularly joint accounts that will be used to pay bills
An up-to-date list of monthly bills that need to be paid on time
All insurance information including health, home, auto, disability and business policies
Know what paper documents you need to keep or shred. Here are some general rules:
Keep: All tax-related documents for up to seven years, including annual tax returns; statements that show a gain or a sale of a security or the purchase or sale of a major asset like real estate; mortgage documents, vehicle titles and insurance policies; multiple copies of birth and death certificates; marriage licenses and divorce decrees; deeds and title documents.
Shred: With identity theft on the rise, it is generally better to shred financial documents before they go in the garbage. After recording all transactions, immediately shred the store and ATM receipts and credit card statements. After a year, shred monthly bank account statements.
