Organizing your statements and setting up your financial filing system is the first step to take before making any major financial decisions. It is important to determine where you stand now before setting financial goals for the future.
Organize your statements
Below is a checklist of the most important files you should assemble. Easy access to these documents is critical for determining your current financial situation.
- Checking and Savings Accounts
- Retirement Accounts (all IRAs, Roth IRAs and 401(k) statements)
- Non-Retirement Accounts (for investments outside your retirement accounts)
- Credit Card Accounts (include any gas or store credit cards)
- Home Mortgages and Other Liabilities (auto loans, etc.)
- Insurance Statements (life, disability, home, car, etc.)
- Tax Returns (state, federal and supporting documentation)
- Wills & Trusts
- Kid's Accounts
Set up a filing system
The best organizational system is the one that makes the most sense to you. But it is smart to create separate files for each account or plan so your account history is easily accessible.
No one likes being buried under paperwork so here's a guideline for how long you should hold onto these documents:
Monthly account statements: one year. Most institutions will issue an annual statement summarizing your account activity. Once that is received and checked for accuracy, you can discard the monthly statements.
Tax returns: seven years. The IRS can audit you up to seven years after a return is filed. At a minimum, you should save your state and federal tax returns and supporting documentation for that amount of time.
Consider computer software as an organizational tool
You can get an overall picture of your financial situation and manage your accounts by downloading your statements from the Internet to software products such as Quicken® or Microsoft Money®.
To get started, ask your bank or brokerage firm which software product they support. Some banks offer support for both Quicken® and Microsoft Money®. Most credit card companies offer downloadable statements as well.
Once implemented, you can begin to track all of your different accounts and the expenses you pay through each. It's a perfect enhancement to your home filing system.