It’s time to become financially organized. It is an essential part of a healthy financial life. When you finally become financially organized, it saves you time and money because it means paying bills on time, finding those important documents during tax season, providing proof of payments when necessary, and disputing credit card or billing mistakes in general. Most importantly, becoming financially organized means dodging the stress of dealing with piles of unorganized bills and paperwork. When you become financially organized, it prepares you to make quality decisions on investments, household budgets, resolving debt, and investment moves. Financial organization will assist your working relationship with your fiduciary financial advisor because there will be less time and effort spent searching for paperwork and more clarity around your financial plan, leading to more informed decisions about your investments and finances.
Having a system to organize financial paperwork is essential, but it is of less importance which particular system is utilized. In most cases, a combination of both paper and electronic filing systems will be extremely helpful.
Items such as bills, banking statements, investment and insurance policies, and other documents that are obtained online can be stored on a computer hard drive or on secure banking websites, third-party bill pay services, and various document storage platforms.
Regarding couples and their finances, having frank discussions to establish responsibilities for financial matters should be a priority. If one partner manages the finances, the other partner should have knowledge about what is happening, where essential documents are stored, and all important passwords for online account access.
Deciding which documents you will keep and which you can throw away is another part of becoming better organized financially. Regarding tax returns, the IRS suggests retaining tax returns and any supporting documents for seven years. Documents such as paper bank statements, investment statements, and credit card statements may be destroyed after one year, especially if they can be viewed online if necessary.
Here we will discuss which specific documents you should store in order to maintain your financial organization.
Income Tax Planning
Tax planning is a preliminary process identifying techniques designed to lower future income taxes. It’s important to note that tax planning differs from income tax preparation, which can often not involve planning. Tax preparation processing the tax information the tax professional has been provided.
An assortment of items is needed to prepare taxes and assess your tax obligations. Maintaining quality tax records is extremely important for your accounting and investment purposes. Several tax documents that should be securely saved and kept accessible include:
- Your filed tax returns for the previous three years.
- Retirement contribution eligibility plan information.
- Pay stubs and statements with typical income and possible irregular taxable distributions that could impact your tax obligations for the current year.
- Statements reflecting deductions, such as your property taxes and mortgage interest payments.
- Statements reflecting the current value and cost basis of your assets owned outside retirement accounts.
- Data on any charitable contributions that have been made.
Investment Planning
Keep policy information, statements, and other important paperwork for these accounts handy to guide you and your financial advisor as you develop an investment strategy.
- Savings accounts
- Money Market accounts
- Checking accounts
- Brokerage accounts
- Mutual funds
- Stocks
- Life insurance cash value
- Certificates of deposit
- IRAs
- Retirement plans
- Employee stock purchase plans
- Stock options
- Annuities
- Real estate
- Bonds
- Precious metals, other personal collectibles
- Business interests
Credit and Debt Planning
Debt is regularly an essential part of an individual’s financial picture. Keeping your statements for your loans can assist in getting a handle on your debt, the interest rate of that debt, and the terms on these loans in these kinds of revolving debt.
- Business Loans
- Student Loans
- Car loans
- Mortgages
- Credit Cards
- Personal loans
College Planning
College planning can be a stressful time for parents and children, but it is essential that everyone stay on track with the financial decisions involved. There are many vehicle types when it comes to college savings, so make sure to stay on top of these accounts with funds that may or may not have contributions from parents, grandparents, aunts, uncles, and the student himself or herself. Some examples of useful college planning documents to maintain are:
- Statements for accounts that are designated for college, such as Coverdell accounts, UGMA/UTMA accounts, and 529 plans.
- FAFSA (Free Application for Federal Student Aid) completed forms for students currently enrolled or about to enroll in college.
Retirement Planning
Retirement is often the financial goal most focused on for most investors. Because of this, it’s vital to keep information pertaining to all retirement accounts, such as traditional and Roth IRAs, 401(k)s, and other accounts, such as 457 plans. A breakdown of some various items to hold on to and keep organized related to retirement are:
- Summary plan descriptions and account statements from employer-sponsored retirement plans.
- Roth and Traditional IRA statements.
- Social Security Benefits Estimate Statement and Earnings.
- Your financial plan including a budgeting model that outlines your expected needs and expenses in retirement.
- Documents regarding health and retirement benefits from your Employee Benefits Summary.
- If applicable, your Veteran’s administration record.
Insurance Planning
Your financial organization includes risk management. This means insurance such as includes life, auto, disability, health, and other coverage you and your fiduciary financial advisor agree is necessary for your security. It’s best practice to re-evaluate your coverage levels, deductibles, and premiums periodically. Some examples of policies you should keep organized records of include:
- Health insurance
- Life insurance
- Disability insurance
- Homeowner’s Insurance
- Renter’s insurance
- Car, boat, or motorcycle insurance
- Umbrella Policy (General Liability Insurance)
- Professional liability policy
- Long-term care insurance
Estate Planning
Two major components are involved with estate planning: The transfer of wealth (making sure that assets are transferred to the correct people) and optimizing estate tax savings. Monitoring and planning for your estate mean preserving these records:
- A copy of your most current last will and testament and letter of instructions.
- A thorough listing of all assets.
- Any trust documents.
- Advance directives.
- Power of attorney for healthcare matters.
- Power of attorney for financial matters.
- Any prenuptial agreement documentation.
- Information on beneficiary designations for IRAs, insurance, annuities, and employer-sponsored retirement plans.
- Deeds of trust or statements showing how assets are titled.
Miscellaneous Financial Documents
There are several other essential documents that do not necessarily fall into one particular category. Some examples are your Social Security card, military service records, adoption records, and divorce documents. A more thorough list includes:
- Passport
- Social Security card
- Birth, death, and marriage certificates
- Vaccine records
- Military service documentation
- Deeds and titles to all real estate, autos, and other assets
- Adoption records
- Divorce records
- Prenuptial agreement
- Paperwork related to religious ceremonies such as baptism, confirmation, ordination, marriage, or annulment.
- Any Jewelry appraisals for items valued over $500.
A List of Professionals
From your financial advisor, employer, or banker, most of us have a large and constantly changing list of professionals we know and trust. It’s vital to update this at least annually, as this information can change often. In the event of an emergency, your family members will need to know who to contact for information about account balances, insurance policies, and so forth. Some suggested professionals that you will want to store contact information including:
- Employers, including managers, supervisors, and co-workers, of frequent contact.
- Bankers and account information, including primary accounts, money market accounts, and any safety deposit boxes.
- Investment professionals (including financial advisors and any trustees.
- Accounting professionals, including CPAs, bookkeepers, bill pay information, other accounting services, and account numbers.
- Credit professionals, including mortgage or credit counselors and bank loan officers.
- Insurance agents, including life, car, home, disability, and other policies.
- Attorneys, including any estate planning, business, rental, commercial, or intellectual legal professionals.
- Health care providers, including primary care doctors and specialists.
A List of Passwords and PINs
It is a good decision to make a current list of all the passwords and personal identification numbers (PINs) that are tied to your financial world. You should keep it with your important financial and legal documents.
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Farther-FamilyVest is your Fiduciary Financial Advisor in Destin, Santa Rosa Beach, and 30A.