Financial Paperwork was the bane of my life. I’m sure I’m not the only one struggling to grasp the idea that in this so called ‘electronic’ age that there is more paperwork floating around now than there ever has been. Invoice after invoice, statement after statement, form after form. My sanity was being washed away by a deluge of paperwork. In fact at one stage it had almost developed into a fear of form filling and a dread of paperwork of any sort.
By financial paperwork I mean every single piece of paper that comes into your life that affects or reflects your financial situation. Generally all the paperwork that comes into my life tends to be related to my finances in one way or another but not always. The ideas outlined below will help you focus on the necessary changes you need to make to get your financial paperwork organized.
While the paperwork in my life still keeps coming, the dread and fear are no longer there and I can manage my paperwork in a calm and orderly fashion. What changed? Well it took a bit of organizing and a lot of focus but I got there in the end. In the process I managed to clear a backlog of a couple of years worth of paperwork and what’s more I had a crystal clear picture of my financial situation. It was scary but it was liberating because I no longer had the fear that there was some bill or invoice lurking around waiting to catch me out.
What are you trying to achieve with your paperwork?
Be clear about what you are trying to achieve when you decide to tackle your paperwork. Are you trying to get a better picture of your financial situation? Create a budget? Tidy up your home? Make sure you know why you are doing this. Just because it is on your to do list doesn’t mean that it has to be done. You need a reason otherwise you will fall at the first fence. So before you tackle your paperwork think of a good reason as to why you should do it. Some obvious reasons are freedom from stress, clarity, easy of use. You get the picture.
Cardboard box clarity
This is a fun way of doing things and it allows you to be lazy for three weekends of the month.
Get a cardboard box. It doesn’t have to be too big just big enough to hold about fifty sheets of A4 paper. For one month place every single piece of paperwork that you receive into it. Every Invoice, every receipt, every credit card bill, every credit card offer, every insurance offer – everything. Make sure to pay your bills as you normally would but once you have paid place the bill into the box.
At the end of the month take the contents of the box and tip them on to the floor. It feels good doesn’t it? Now I want you to roll around on the floor…only kidding. What I want you to do is to create four piles (or as many piles as you see fit).
1. Receipts, 2. Bills, 3. Junk and 4. Statements.
In the receipts pile I want you to put all the receipts that you have received over the month. This would include things like receipts for dinner, groceries, gas. In the bills pile put all your credit card, energy and auto bills into. In the junk pile put all those offers you receive in the post. Things like credit card offers, loan offers, insurance offers etc. Finally in the statements pile put all the bank account statements, loan statements and mortgage statements into.
These four piles will now form the basis of your monthly budget. These piles of paper are worth their weight in gold because the information contained in them allows you to build a personal budget and will help you turn you financial situation around. Most people simply do not know exactly where they stand financially. Until they do they will be doomed to muddle through each financial decision they face. Not good.
I like this method because it is simple and effective and can be fun. It helps to centralize all your paperwork in one place so you don’t have to be worrying that you are missing anything. By working through the pile of paperwork you get a great sense of achievement. The great thing is that it doesn’t take long to do at all.
X marks the spot
When you pay a bill mark it with a large ‘X’ and put the date on it. This will accomplish two things. Firstly it will allow you to keep track of what is outstanding and what has been paid and secondly it will give you a sense of closure and satisfaction that you are making progress with your bills. Again simple but effective.
Don’t be afraid to ask questions
Completing financial paperwork can be a nightmare. If you want to transfer your mortgage or set up a new bank account you can be hit with a lot of forms and requests for information that will leave your head spinning. These forms can be confusing and contain things you simply do not understand. My advice is simple – ASK.
How else are you going to complete the forms correctly if you do not ask questions about items you do not understand? If you fill out the form incorrectly you just know that the bank will be back on to you looking for more information. See my article on how to deal with banks and financial institutions to get a better insight.
Destroy the evidence
A lot of the paperwork that we acquire is of no use or becomes obsolete after a period of time. Once we include the information in our budget then we may no longer need the physical piece of paper. Be careful of how you dispose of these pieces of paper. Many of them will contain sensitive information about your bank accounts and credit cards. The best way destroy the evidence so to speak is to shred it and then divide up the shredded material and place them in separate thrash cans. It’s a bit paranoid but you would be surprised at the length some people will go to get information about you.
How long should you keep paperwork?
Well it depends on what the item is. If it is something like a grocery receipt then once it is taken into consideration in your budget then you can destroy it. If it is something like a credit card bill then it should be kept for a minimum of six months. This is so that you have a physical back up if there ever was a dispute with the bank. Financial documents that relate to loans or your mortgage or insurance should be kept indefinitely. Ideally these should be kept in a fire proof safe. Fireproof safes can be bought quite cheaply. Look on the money spent as an investment. The amount of hassle you will save yourself in the event of a fire will be huge.
Storing your paperwork
Everyone will have their own system. I generally prefer to use a lever arch folder with lots of dividers. I use each divider to separate the months. I use one folder per year and I use a hole puncher to punch holes in each bill or document. As mentioned earlier for the more important documents I store in a fire proof safe.
For me the goal of any filing system should be ease of access. If I get a call about a bill I can ask when the bill was issued. If they say Feb 2007 then all I have to do is go to the 2007 folder and check the Feb section. If I find the bill and it doesn’t have an ‘X’ on it I know that I haven’t paid it.
In Summary
Financial paperwork is a necessary evil. You have two choices. You can either sit there and moan about it and do nothing or you can get started and get organized. As you see from this article getting organized is not a big task but the payoff is huge.
Feel free to experiment and find your own level of comfort with your financial paperwork and records. The system has to work for you and the only way that will happen is if you design it. There is no point in trying to create a fancy sophisticated record keeping system because in the long run it is always the simplest record keeping systems that last.
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