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3 Steps for Organizing Your Financial and Tax Records

Learn Money Girl's simple, 3-step system to help manage your financial records and stay organized. Plus, she reveals a great resource for determining which records you should keep - and for how long.

By
Laura Adams, MBA,
January 7, 2015
Episode #384

Page 1 of 3

A 3-Step System to Organize Your Financial and Tax RecordsWhen life gets hectic, it’s easy to fall behind on organizing your financial and tax records. All of a sudden you realize it’s been weeks since you even thought about paying bills, reviewing account transactions, or filing mountains of paperwork.

Problem is, being unorganized is a surefire way to mess up your finances. When you lose control of your finances, you lose money!

In this episode I’ll give you details on a simple, 3-step system that I use to manage my financial records and stay organized. I’ll also give you a terrific resource for figuring out exactly what financial records to keep, and for how long.  .

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Key Advice for Organizing Your Financial Life

The ultimate goal for organizing your financial and tax records is to have a paperless system. That would help the environment, save space in your home, and keep your documents safe from theft, fire, or water damage.

But if you’re like me, you’re probably not completely paperless yet, and still have certain documents to handle on a regular basis. My system for organizing different types of financial records will help you process them efficiently - and find them quickly later on. Feel free to copy what I do, or adjust my system to fit your needs. 

The vast majority of your incoming paper—such as bills, account statements, and receipts—should be eliminated to keep you safe from identity theft and to simplify your financial life. Continually pare down what you receive each month and throw away as much existing paper as possible, keeping only what you really need.

Every time you receive a financial document through snail mail, find out if a digital copy is available, then opt to go paperless. You can always print out a paper copy of a digital document if you really need to.

Prep for the 3-Step System

To get started with my simple, 3-step system for managing your financial records, you’ll need the following supplies:

  • Portable file box 
  • 3-ring binder 
  • 3-hole punch 
  • Filing cabinet 
  • Hanging file folders 
  • Manila file folders

You’ll find out how I use each of these items as we cover the following steps.

Step #1: Centralize Your Paperwork

The first step is to centralize where and how you process your financial documents. I keep a portable file box in my kitchen, where I open mail and go online. For you, the best spot might be in an office or a bedroom.  

The file box is a temporary catch-all for everything that needs follow-up, such as receipts, invitations, and documents to be filed. Keep your file box as close as possible to where you process mail or pay bills, so it’s really convenient to use.

My file box has a lid with a handle, so I can easily move it to another room, if needed, or hide it away in a cabinet that locks. My file box has 7 hanging file folders with the following labels:

  • Receipts 
  • Bills 
  • Action 
  • Taxes 
  • Shred 
  • File in Binder 
  • File in Cabinet

I’ll explain what each of these files is for in just a moment. If you have other major categories to handle, such as business mail or documents for a roommate, create more hanging folders as you need them.

The idea is that your mail and papers should never end up in piles or scattered around your home. The moment you receive any paperwork or open up your mail, decide which hanging folder to drop it in for future processing.

You’ll be surprised how good you feel when your paperwork has a home that’s centralized, organized, and portable.

See also: Records Organization Blueprint - a free download to know which records to keep and for how long!

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