Creating a Financially Organized Life
Get a jump-start on creating an organization system for your financial paperwork.
Organization is a cornerstone of a healthy financial life. At the most basic level, financial organization saves time and money by aiding in tasks such as paying bills on time, finding needed documents during tax season, providing proof of payment, disputing credit cards or billing errors, and avoiding the stress of dealing with piles of unorganized bills and paperwork.
Proper organization of finances also sets the stage for better decisions and planning regarding investments, budgeting, and debt; this helps your working relationship with your financial professional because you will spend less time looking for paperwork and more time gaining clarity surrounding the overall economic situation. Ultimately, good organization leads to more informed decisions about your investments and financial plans.
Remember, which system you follow is not so important; what matters is that a financial organization system exists. A combination of electronic and paper filing systems will do the trick in most cases.
You can store and back up bills, statements, and other documents delivered online on a computer's hard drive or through online banking websites (as well as third-party bill pay and website document storage platforms). Some websites offer budgeting and spending information and advice.
For couples, establishing responsibilities for financial matters is an important priority. If one spouse manages the finances, the other should stay informed about finances, where important documents are stored, and the passwords for all online accounts.
Knowing what documents to keep or toss is another essential part of organization. The IRS recommends retaining tax returns and supporting documentation for seven years. Others, such as paper bank statements, investment account statements, and credit card statements, can be shredded after a year (mainly if they are accessible online).
Financial paperwork generally falls into the following categories:
investments,
taxes,
credit cards and loans,
college savings,
retirement savings,
insurance, and
estate planning. Let's look at what documents you should keep on hand for each.
Income Tax Planning
Tax planning is a forward-looking process identifying strategies to reduce future income taxes. Keep in mind that income tax planning is not the same as income tax preparation, which focuses on documents required by the IRS. For income tax preparation, consult with your tax advisor.
Various documents are required to prepare taxes and assess your situation, so keeping proper records is extremely important for IRS, accounting, and investment purposes.
Tax documents that should be safely stored and easily accessed include:
- Tax returns for the last three years
- Retirement plan information showing the amount you are eligible to contribute
- Paycheck stubs or statements showing regular income and unusual taxable distributions that may change your tax picture this year
- Statements showing significant deductions, such as mortgage interest and property taxes
- Statements or other documentation showing the cost basis and current value of assets owned outside retirement accounts
- Information on charitable contributions
Investment Planning
Keep policies, statements, and other important paperwork for these listed accounts accessible to help you and your financial professional develop an investment strategy.
Common investor accounts:
- Checking accounts
- Savings accounts
- Money market accounts
- Certificates of deposit
- Brokerage accounts
- Mutual funds
- Annuities
- Life insurance cash value
- IRAs
- Retirement plans
- Employee stock purchase plans
- Stock options
- Stocks
- Bonds
- Real estate
- Precious metals, other collectibles
- Business interests and other investments
Credit and Debt Planning
Debt is often a significant part of the overall financial picture. Statements for loans will help you understand your debt level, the debt's interest rate, and loan terms on these kinds of revolving and installment credit debt.
- Credit cards
- Mortgages
- Auto loans
- Student loans
- Business Loans
- Personal loans
College Planning
There are many college savings vehicles, so keep track of all accounts with funds saved by parents, grandparents, aunts, uncles, and other relatives. The listed statements are useful to stay on top of balances and track savings:
- Statements of accounts earmarked for college (529 plans, Coverdell accounts, UGMA/UTMA accounts, accounts in parents' names earmarked for college)
- Completed FAFSA (Free Application for Federal Student Aid) for students already enrolled or preparing to enroll in college
- Other documentation relating to student loans
Retirement Planning
Retirement is the most significant financial goal for most investors. As such, keeping track of all retirement accounts, including 401(k)s from current and previous jobs, traditional and Roth IRAs, and other accounts such as 457 plans, is essential.
- Account statements and summary plan descriptions for all employer-sponsored retirement plans
- IRA account statements
- Social Security Personal Earnings and Benefits Estimate Statement
- Account statements for all assets. (See Investment Planning)
- A budget showing expected living expenses in retirement
- Employee benefits information on health and retirement benefits
- Veteran's administration record
Insurance Planning
Risk management includes life, auto, disability, health, and other coverage you may need, as well as current or future Social Security benefits. To manage and periodically re-evaluate coverage levels, deductibles, and premiums, retain these documents, including employer-sponsored insurance.
- Life insurance
- Disability insurance
- Health insurance
- Homeowner's or renter’s insurance
- Automobile insurance
- General liability (umbrella policy)
- Professional liability
- Long-term care
- Social Security Personal Earnings and Benefits Estimate Statement (PEBES) (showing survivor and disability benefits)
Estate Planning
There are two critical aspects to estate planning: wealth transfer (ensuring that assets go to the right people) and estate tax savings. Planning for and monitoring your estate requires maintaining these records, including:
- A copy of your latest will and letter of instructions
- Index of all assets (see list under Investment Planning. Also includes real estate, business interests, etc.)
- Trust documents
- Advance directives
- Power of attorney for healthcare
- Power of attorney for financial matters
- Prenuptial agreements
- Beneficiary designations for IRAs, life insurance, annuities, employer-sponsored retirement plans
- Statements or deeds of trust showing how assets are titled
- Pet care
Miscellaneous Documents
Many other documents fall into a catch-all miscellaneous category. These include everything from a Social Security card to military service records to adoption and divorce paperwork. Keep the list current by adding new documents as appropriate.
- Birth, death, and marriage certificates
- Social Security card
- Passport
- Vaccination records
- Military service records
- Deeds and titles to all real estate, autos, and other hard assets
- Adoption papers
- Divorce papers
- Prenuptial agreement
- Religious ceremonies such as baptism, confirmation, ordination, marriage, annulment paperwork
- Jewelry appraisal list for all items valued at more than $500
Make a "Professionals List”
Most of us have an extensive and constantly changing list of trusted professionals, from employers to bankers to insurance agents, making updating this at least once a year essential. In an emergency, family members must know who to contact for important information about insurance policies, account balances, etc.
Some information to keep on a professional list includes:
- Household employers (including immediate supervisor, HR manager, etc.…):
- Contact Name and Contact Info
- Banks, bankers, and account numbers (including primary accounts, money market accounts, and safety deposit boxes)
- Banker's name and your account #
- Investment professionals (including all investment professionals, trustees, etc.)
- Advisor's name and your account #
- Accounting professionals (includes CPAs, accountants, bookkeepers, enrolled agents, bill pay, and other accounting services)
- Accountant/CPA's name and your account #
- Credit professionals (includes mortgage brokers, credit counselors, bank loan officers, and others)
- Broker/Counselor's name and account #
- Insurance professionals (includes life, car, home, disability, and other insurance agents and advisors)
- Professional/agent's name and your account #
- Estate Planning professionals (include estate planner, trust services, and executor)
- Estate planning professional's name and your account #
- Attorneys (includes estate planning, divorce and prenuptial, business, rental, commercial and intellectual property, and taxes)
- Attorney's name and your account #
- Other family service providers (including financial aid counselor, retirement coach, and life or career coach)
- Counselor's name and your account #
- Health care providers (including primary care doctors, specialists such as cardiologists, gynecologists, oncologists, etc.)
- Provider's name and your account #
Work With Clayton Financial Group
At Clayton Financial Group, we help our clients achieve their plans for life and take their growth and security seriously. We are an independent boutique advisory firm with national coverage and decades of industry experience.
Contact us today if you're looking for help with investment planning, tax planning, risk management, estate planning, and more.
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165 N Meramec Ave, Suite 130
Clayton, MO 63105