A Cluttered Life Can Cost You In The Long Run: Manage Your Important Financial Documents
It may surprise you to learn that many people have important financial documents strewn all over their homes – in desk drawers, underneath books, in various files cabinets and often not located in the correct file, in between books on their bookshelves, etc. After 20 years of serving hundreds of families and individuals as a financial advisor, I can attest to the truth of this behavior.
If your filing system is anything like this, you may have a difficult time keeping tabs on your life, financially speaking. Your family and professional advisors will benefit greatly by you becoming organized. If you have a meeting planned with your financial advisor, CPA or mortgage broker, do yourself a favor by spending an hour or two to put your pertinent files and documents in its right location and in order.
At the very least, do this for your family…those who will eventually inherit your estate. Why add to the stress and sorrow of your passing by leaving your family with a cluttered mess of your most important financial documents and files, for them to have to piece together like looking for lost pieces of a 5,000 piece jig saw puzzle?!
Forgive me if I may come across as being too harsh, but if you have ever experienced the frustration of having to locate and assemble important financial, health care or real estate documents, so that you can set the estate affairs of a loved one in order, then you can begin to understand why I am so adamant about being organized in this manner. A large file cabinet may work. Perhaps you prefer using storage boxes, or units that can be stacked one upon another. These can be purchased at your local office supply store. Once you determine the type of system that you will need, here is how you want to assemble your financial documents:
Let’s Begin By Gathering Your Important Financial Documents
You should arrange them by account type such as, ROTH IRA, 401(k) and mutual fund statements. You are going to need your annual statements, especially the “1099-R” statements that arrive once per year, for tax purposes. By the way, it wouldn’t be a bad idea for you to keep a record of your “buy” & “sell” trade confirmations on a yearly basis. There is nothing more dreaded by an accountant or CPA than missing cost basis! I recommend doing an annual clean out, after tax season. After you have filed your taxes, then you can breathe easier and perhaps digitize your previous year’s financial documents.
In the event that you may get audited, you will definitely want to have ready access to your bank statements for the last three years. With respect to credit card statements – since many banks may also record and list credit card transactions on your bank statements, it wouldn’t be a bad idea to keep credit card statements for at least 5 to 7 years.
Mortgage related documents
Mortgage statements should be maintained for no less than the number of years that you have owned your home. With so many banks being sued or investigated for mortgage fraud, it is imperative that you maintain your mortgage records in a safe place. You never know if/when you may have to dispute something with respect to the ownership of your home, or with regards to the chain of title! Other documents that should be included in your file cabinet -and located within a folder that is labeled specifically for that document- is the following: 1) Federal and State tax returns, Annual Social Security benefit statements, payroll statements, life insurance policies, medical records, product warranty & guarantee certification statements and a written history of any mechanical work that was done on your vehicle(s) and by whom.
I know that this may seem tedious or maybe you feel as though my advice will make your life more complicated. Keep in mind, you can always “go digital”! One of the best uses for a remote hard drive and a tablet computer is to scan everything and save these documents electronically. Of course it is up to you, whatever you are more comfortable with. The most important thing is that you GET IT DONE and then maintain a consistent system for being organized. After you complete this and have finally organized your life that is reflected in file folders and documents strewn throughout your house, the peace of mind that you will experience is priceless!
- Financial and Retirement Planning
- Portfolio Management and Investment Allocation (401K, IRA, Brokerage)
- Estate Planning
- Retirement Income Planning
- Insurance and Annuities