I believe financial satisfaction is based on two things: knowing what needs to happen to reach your financial goals, and knowing what data you need to access to get there. I see people all the time who have goals that never are realized, simply because they aren’t willing to get clear about the concrete data of their finances. It has very little to do with not having enough money!
This is part of an ongoing series devoted to financial organization (you can read the first in the series here). For the past several weeks, I have been providing step by step tips to help people become more financially organized in an area where most people are particularly challenged—maintaining financial documents. This week we’ll be talking about maintaining some documents long term and the best way to store them.
Ongoing File Preparation
Finally, I am going to tell you what to do with that other standing file! We’ve been focusing so much on the Monthly files that the extra standing file was starting to feel left out. But no longer!
This standing file’s name is Ongoing Documents. You can write that in sharpie directly on the flap, or make a beautiful label to place on the front.
Next, create the labels to affix on each tab for standing file. Here are the label names:
- Pay Stubs & W-2
- Medical Bills & Policy Info
- Major Purchases
- Banking Statements
- Investment Statements
- Retirement Statements
- Tax Returns & Supporting Docs
- Tax Returns & Supporting Docs
- Tax Returns & Supporting Docs
- Sales & Home Improvement (resident, stock or mutual fund transactions)
- Satisfied Loans
That’s it! If you’ve been working on this for the past several weeks, you probably see how the Statements in-box documents will get stored here in the Ongoing Documents standing file, yes?
The Monthly Filing Process for Ongoing Documents
Step One: Use the In Box Daily As You Process Mail
If I get a physical statement from my bank, investments or health insurance (like an explanation of benefits), I throw them into the Statements inbox. If I weren’t self employed, I would also be adding my paystubs to the “Statements” inbox.
Step Two: Once Every Month Or So, Spend ~15-30 Minutes Filing
- Find a show you like on TV.
- Get your Ongoing Statements standing file and your “Statements” in-box.
- Transfer your documents to the appropriate section in the standing file.
You guessed it: This only happens every couple of months for me! If you do this every month, it should take 30 seconds. And, of course, you can do it along when you file your monthly bills.
Paperless Option: Instead of sitting in front of the TV, you might be receiving the majority of these documents via e-statement—this means you need to set aside time to download them from each site. You may want to create an E-Statement file in your email…this way, as you get notification from each entity that your monthly statement is ready, you can move the email to the folder, and then you have the email link handy when you’re actually ready to download stuff.
I recommend you create an Ongoing Documents main folder on your computer, and then have subfolders for each category (simply copying the names of the standing file labels).
To give you extra organization, save each file by vendor_date: For example, my Wells Fargo banking statement would be: Wells Fargo Banking_2012_06. This will allow the computer to file alphabetically by entity and then chronologically.
Frequently Asked Questions About The Ongoing Docs Filing Process
Q: Why do I have three categories for Tax Returns?
A: You can be audited by the IRS for no reason for 3 years and for 6 years if they think you omitted over 25% of your income. There is no statute of limitations if you don’t file anything! The self-employed should hold 6 years just to be safe. See IRS Publication 552 on record keeping guidelines.
I also haven’t asked you to label the standing file with tax return years because you’d just keep having to re-label—but if you’re doing this electronically, you can use the years.
Q: Why do I need to save this stuff?
A: Different documents have different retention timelines, but it’s just easier to stick them all in here and manage retention annually. Next time we’ll talk about some retention guidelines so you don’t end up with tons of data to retain forever!
We are almost DONE with setting up a comprehensive financial document management system! Next week we will cover document retention guidelines.
ACTIONS THIS WEEK:
- Schedule about 30 minutes this month to transfer your Statements inbox data to your standing file or electronic file.
- Create an estatements folder in your email to capture statement notifications
- Create the electronic file equivalent of the standing file to capture electronic statements you need t download.