Organizing your financial paperwork: Simple strategies to control the clutter

Great article from Consumer Reports – I wanted to share with all of you.

Organizing your financial paperwork: Simple strategies to control the clutter

Published: June 01, 2015 05:30 PM

With tax season receding in the rear view mirror, there are no more excuses for ignoring financial clutter. And there are plenty of good reasons to do a massive re-org. For one thing, this stuff is too important to be tossed in a pile to gather dust.

Knowing where the important papers are filed saves you and your loved ones from panicky digging in case of an emergency. Knowing when you have to attend to specific financial tasks helps you avoid late fees—or worse. Knowing how it all meshes enables you to take control over your spending and saving.

For more information on this subject, read “May to-do list: Organizational tips to conquer paperwork clutter.”

With so many options for organizing personal financial paperwork, it’s easy to get bogged down before you even begin. Should you go paperless? Drink the Quicken Kool-Aid? Dedicate a file cabinet? Buy a bunch of binders? Whatever you choose, “It has to be a system you’re going to follow,” advises Craig Adamson, president of Adamson Financial Planning in Marion, Iowa.

Simplest is best

Whether you’re starting from scratch or are facing a morass of many years, simplest is best. “For most people, the ideal is to have some sort of file cabinet with hanging folders,” says Jeff Baum, a principal with Baum & Baum, certified public accountants in New York City.

Set up one folder for financial information, another for life insurance policies, others for car and health insurance policies, another for a copy of legal instructions such as your will and powers of attorney, one for your financial statements, and one for credit card information, including your PIN number. Unpaid bills go somewhere where you won’t forget about them; paid bills get tossed in another file. While you’re at it, make a file with the contact information for important people who affect your finances: In addition to the obvious suspects (your lawyer, accountant, and personal financial advisor), include the people who take care of your house and car, as well as any financial dependents, such as Aunt Sadie in the nursing home.

In lieu of a filing cabinet, Adamson gives all of his clients a hefty loose-leaf binder with plastic file inserts for each element of their important financial information. But even a large box will do, he notes. “It’s a place to consolidate information.”

The nice thing about a simple system, he adds, is “there’s an expectation that everything goes in the binder” or the filing cabinet or the box in the closet. In addition to being easy to set up and maintain, having everything in one easy-to-access place is especially reassuring for adult children of aging parents. “They know all the papers are in one spot, instead of having some in the safe, some in the lockbox, and some in the second bureau drawer on the right side.”

Paperless plusses

To be sure, paperless systems have some big plusses. The most obvious: “You don’t have paper clutter,” Adamson points out. Documents uploaded to the cloud are available any time you need them. If your wallet is lost or stolen while you’re traveling, you can access your credit card numbers and the emergency number to call, says Baum, who uploads his personal 411s to Google Docs.

The downside, though, is that even the easiest online system still requires the extra steps of scanning, formatting to PDF, and backing up the file – and that’s on top of setting up folders in a way that you can find them. That can just be one task too many.

Despite the move to paperless organizing, Baum concludes, “For most people, paper is better.”

— Catherine Fredman

Editor’s Note:A version of this article previously appeared in the May 2015 Consumer Reports Money Adviser.

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