We typically associate organizing and decluttering with overflowing closets and garages where we can’t park our cars. But disorganization can extend to not-so-obvious areas of our lives, like our finances. Unfortunately, the impact of financial disorganization can be far-reaching — with late charges, overdraft fees, missed goals and a sense of overwhelm often being the result.
On the other hand, decluttering our finances can have an empowering effect. When I began paying down debt, one of the first things I did was to organize my financial papers. Knowing where everything was and exactly what debt I had made me feel more in control. Now, when I work with coaching clients, we address organization early to pave the way for paying down debt and meeting other goals.
The good news is that it doesn’t take much to clean up your financial organization. With tasks that tackle your physical organization and money management, you can be on your way to a more streamlined and organized financial life in less time than it takes to clear out a garage.
1. Reduce your paper clutter
Receiving your bills and bank statements electronically can reduce your financial paper clutter and help you stay organized. So, if you still get most of your bills and account statements via snail mail, review which ones you can move to paperless billing.
For paper you already have on hand, assess what you need to keep. If you have five years’ worth of pay stubs and bank statements, get your shredder ready. According to the Federal Trade Commission, pay stubs, paid medical bills, credit card- and bank statements should be kept for a year. But if you can access them online, you may not need the physical copies. On the other hand, you should keep tax returns and associated documents for at least three years — up to seven years or more, depending on the details of your returns. Scan other documents that you want to access but don’t need physically.
2. Establish a filing system
Once you’ve identified the financial documents you can toss, organize what’s left. Gather all your bills and financial paperwork and decide how to store them. Common options include a filing cabinet, portable file box, expandable file folder or 3-ring binders. Designate a hanging file folder or binder section for each category of bill or documents — such as tax returns, retirement accounts, insurance policies, bank accounts, debts, etc. Within each hanging folder or binder section, use a folder or divider for each account.
For example, if you have four bank accounts, you would designate one hanging file folder for that category and place four folders inside — one per account. For tax returns, use one file folder per year and include one for the current year to keep receipts organized and place tax documents as they come in. It’s worth noting that you should store legal documents such as your car title, house deed and will in a fireproof box, home safe or other secure storage.