6 Tips to Simplify Your Finances and Keep Good Records
Feel like your personal finances are too complicated? It’s time to streamline and declutter. Laura gives tips to simplify your financial life, stay organized, and know which financial records to keep and for how long.
Laura Adams, MBA
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6 Tips to Simplify Your Finances and Keep Good Records
When life gets hectic, it’s easy to let your finances get too complicated. Suddenly you realize it’s been weeks since you even thought about paying bills, reviewing account transactions, or filing mountains of paperwork. But being unorganized and losing control of your finances is a surefire way to lose money!
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In this post, you’ll learn tips to simplify your financial life and stay organized. I’ll also review what financial records to keep and for how long. Streamlining and decluttering can help you stay focused on what matters, reach your financial goals, and reduce stress.
6 Tips to Simplify Your Finances and Keep the Right Records
- Go Paperless.
- Know Which Paper Documents to Keep.
- Streamline Your Taxes.
- Create a Digital Filing System.
- Use Online Banking Services.
- Consolidate Financial Accounts.
Use these six tips to simplify your personal finances and maintain more control over your money.
1. Go Paperless.
One of the best ways to streamline your finances is to eliminate or drastically reduce incoming snail mail, such as bills, account statements, and receipts. Every time you open your physical mailbox and see paper inside, make a note to log on to your online account or contact the merchant and request to go paperless, when possible.
Continually pare down what you receive each month and throw away as much existing paper as possible so you keep only what you really need. Not only does a paperless system save trees and many other environmental resources, but it saves your time and attention.
Going digital saves storage space in your home and keeps your documents safe from theft, fire, or water damage.
Going digital saves storage space in your home and keeps your documents safe from theft, fire, or water damage. But there are some vital paper documents you still need to keep and I’ll cover those in a moment.
When you receive paper documents that you can easily find online, such as a utility bill or an insurance policy, don’t keep them. After reviewing the information, destroy any document that contains personal information—such as your name, address, account number, Social Security number, and especially pre-approved offers for credit cards—with a cross-cut shredder that turns it into confetti.
Here’s a tip if you get a lot of junk mail for pre-approved offers of credit or insurance that you don’t want: opt out at optoutprescreen.com. This is the official, centralized site where you can choose to be removed from the offer lists provided by the major national credit reporting companies.
Even something good, like a paper check, could be direct deposited into your bank account instead. Some companies even charge less or offer financial incentives when you choose direct deposits or e-statements.
Remember that as you make the transition from paper to e-documents, you can always print out digital versions when necessary. And don’t wait to go paperless until after you deal with your existing paper. You can pare down your existing files later.
Just get started now with a zero-accumulation rule. Create a streamlined digital system that’s simple to maintain going forward. You’ll feel great about helping the environment, saving time, saving space, and cutting clutter in your home.
2. Know Which Paper Documents to Keep.
First, let’s cover which paper documents you should keep. Never throw away these originals, even if you have a digital copy:
- Wills, trusts, powers of attorney, and medical directives
- Promissory notesÂ
- Loan documentsÂ
- Titles or deedsÂ
- Documents with raised seals and notarized signaturesÂ
- Home closing documentsÂ
- Receipts for home improvementsÂ
- Receipts for expensive itemsÂ
- Birth, adoption, and death certificatesÂ
- Marriage and divorce certificatesÂ
- Military recordsÂ
- Sentimental documents like handwritten notesÂ
- Any financial document you can’t access online
Some financial institutions may only offer free access to online documents for a limited period. If you need them later, they may not be available or you might have to pay for access, which is why it’s easier to download and save them as you go.
Consider keeping vital original documents in a secure place, such as a bank safe deposit box.
Consider keeping vital original documents in a secure place, such as a bank safe deposit box. You can get a small storage box for less than about $100 a year at a local bank or credit union. If you have an attorney, they can also keep records for you.
Another option is a home safe or a filing cabinet that locks, if they’re fire and flood resistant. Put all key documents in an airtight plastic bag, just in case. Plus, keep digital backup copies of these documents in the cloud, just in case the originals get destroyed. I’ll cover more about digital filing in a moment.
3. Streamline Your Taxes.
You might be wondering what to do with your old tax returns. The IRS allows you to keep digital copies of returns and supporting documents for the income, deductions, and credits you claim.
Generally, you need to keep old tax files as an individual for a minimum of three years. However, if you have complicated transactions, such as the purchase or sale of investments or real estate, I recommend holding taxes for seven years so you could answer any questions that could arise in an IRS audit.
4. Create a Digital Filing System.
A key part of going paperless is making it easy to scan documents that you don’t need to keep in physical files, so you can shred the paper and file the digital copies.
Try a free scanning app, such as Genius Scan, on a mobile device. It’s loaded with image enhancement features and allows you to export documents as JPEG or multi-page PDF files to email, text, or cloud services such as Google Drive, Dropbox, and Evernote.
If you have stacks of paper to scan, a traditional flatbed scanner with a document feeder will save time. Many inexpensive printers have built-in scanners that send files to your computer or email. There are portable scanners that even integrate with a variety of services and accounting software, such as QuickBooks and TurboTax.
Create a digital filing system, such as folders and sub-folders on your computer desktop, plus at least two backup locations.
Create a digital filing system, such as folders and sub-folders on your computer desktop, plus at least two backup locations. You might save digital files on an external drive and use a free cloud service. Those backups will be a lifesaver if your computer dies or disappears.
Yes, storing sensitive information electronically means you could be hacked. However, the advantages of digital docs far outweigh the downsides, especially when you take smart precautions like password protection on your devices and external drives.
Remember that identity theft commonly occurs when thieves steal snail mail and paper containing confidential information. So, going digital can also reduce the likelihood of a thief intercepting your sensitive information.
Once you create a plan for what paper and digital documents you’ll store where, make sure your family or loved-ones know how to find important documents if you weren’t around.
5. Use Online Banking Services.
Once you’re in a routine of processing your incoming documents digitally, it’s time to focus on outgoing documents, such as your payments. I hope you’re not still buying, writing, and mailing any paper checks. Not only are they costly and time consuming to write and mail, but they can be stolen from your mailbox or at the receiving end.
Just about every large or small banking institution offers free online bill pay. You can enter any company or person and the service will send money electronically or print and mail a paper check to the payee. All you need to know is a payee’s name, mailing address, the amount you want to pay, and the date you want your payment to arrive.
For recurring bills, such as rent or a car payment, you can set up automatic payments or enter them manually every month. Many banks can request e-copies of your bills and act as a centralized hub for all your necessary payments. At a glance, you can see your pending payments and the history for each biller in your account.
If you can’t get funds directly deposited into your account, deposit paper checks remotely.
You can create customized email alerts to inform you when a bill has arrived or remind you about the due date. That’s a handy way to make sure your bills are paid on time so you eliminate late fees and boost your credit score.
Additionally, consider other transactions you can put on auto-pilot, such as transfers to savings and retirement contributions. Let technology give you a leg up so nothing falls through the cracks.
Another key banking task that you can simplify is making deposits. If you can’t get funds directly deposited into your account, deposit paper checks remotely. Most bank apps have a remote deposit feature that allows you to use a mobile device to snap a picture of the front and back of the endorsed check, and hit the deposit button. Doesn’t get any easier than that!
Be sure to never access any financial account from an open wireless network, like in a coffee shop or a library. By monitoring your account activity and setting up strong passwords that you change on a regular basis, you can reduce the likelihood of fraudulent activity.
Use a password manager, such as Roboform or LastPass, to end the vicious cycle of resetting forgotten passwords. They store and encrypt your login data and automatically fill online forms. You can try a limited number of passwords for free, but they are well worth purchasing.
See also:Â How to Invest Money in Your IRA or 401k Retirement Account
6. Consolidate Financial Accounts.
Having fewer financial accounts can greatly simplify your life. Consolidating makes your money easier to monitor, cuts paperwork, and reduces the paper trail at tax time.
Paring down investing, retirement, bank, and insurance companies can also cut fees and qualify you for discounts. Most people only need one checking and one savings account. If you have 401(k) and 403(b) plans at old employers, do direct rollovers to a single IRA.
Even the investments you choose inside retirement and investing accounts can be simplified. You might put all your money in the same fund family or choose a low-cost index fund or exchange-traded fund. Also consider a target-date fund, which is a type of diversified mutual fund that automatically shifts the mix of assets as you approach retirement.
Make getting financially organized a priority right now. You’ll feel more in control of your finances, eliminate expenses, and save time—so you can spend it doing something you enjoy.
See also:Â Are You Making Investing Too Complicated?
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About the Author
Laura Adams received an MBA from the University of Florida. She’s an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura’s previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.