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Plan Well, Retire Well

Saving and investing your money
financial house v2

Getting My Financial House in Order for the New Year


It's that time of year when our minds turn to getting our lives ship-shape. Big box stores have set up huge displays of storage containers and gadgets to get us organized. Ads are pushing dieting and getting in shape.

My personal goal is to get my paper and electronic records cleaned out and ready for another year.

I want to know that I can find a document when and if I need it, but I want to spend the least amount of time possible organizing and sorting that information. I call it being "disorganized at a higher level."

The system that has evolved over time involves a set of file folders (paper and electronic ones) for several different types of records. When a new paper document arrives, I stash it in the front of the folder. Electronic statements go in electronic folders for each account, in a larger "Finances" folder. In the paper folders, by default, newer information is always at the front, older is at the back.

Over the last couple of days, I've been doing a quick purge of many of those files. Here's how I attacked them.

Credit card agreements, member benefit brochures, and other account documents: This was a year of transition for me where credit cards are concerned. A couple of accounts were closed, a couple of new ones were added. I raced through the folder where I toss all those items, pulling out anything with the logos of the old cards. Then I shuffled through those to separate generic info from pages that contained personal information and needed to be shredded. Time: 5 minutes.

Bank accounts: I hang onto bank statements for 7 years, after reading the story of a financial magazine editor who was audited by the IRS and needed those to document his income and expenses. Seven years ago, I was still getting those statements in paper form. So I yanked my Bank Accounts folder out of the filing cabinet and flipped through it until I reached 2010. Everything behind that (which meant they were at least 7 years old) went into the shred pile. Time: 3 minutes.

Bills: If I get a paper bill, it goes into a generic "Bills" folder until the end of the year. Here at the end of the year, I throw them into an envelope with the year written on it, and stash it in a box in the basement where I also store my older tax returns. I keep them for a year or two - probably longer than needed, but I'm not spending any time sorting or filing. When I put 2016s bills in the box, I pulled out the oldest year from the box and added it to my shred pile. Time: 10 minutes

Account alerts and messages: I appreciate getting a message when a bill or account statement is ready. It only takes a quick look to see that the amount looks about right. (One of the problems with not getting paper statements is the tendency to not pay attention.) But I start tuning out if I get more notices than that. One of my bills notifies me when the bill is ready, when the payment is about to be deducted from my checking account, and again when the payment has been received. I logged in to that account and changed my preferences for how and when I hear from that company. Time: 10 minutes

Email accounts: In the email account where I get those notices about bills and account statements, I sorted messages by sender and deleted all but the newest messages about those accounts. One of my email providers allowed me to set a rule to keep only the most recent message from a particular sender. That should reduce the amount of email clutter I'll have to deal with next year. But there was a lot more clutter in my email accounts than these financial message. I get a lot of messages from financial discussion boards, info services for financial planners, frequent flier programs, etc. And I had not cleaned out my email accounts for about three years. Once I got started, it was hard to stop and the time got away from me. Time: hours!

Next up, I still have a couple of items to do before the New Year.

Computer back up: I recently got a cat. I guess you'd say he's at the teenager stage. He has the body of a grown cat but the mind and coordination of a kitten. He hadn't really damaged anything until a couple of weeks ago, when he knocked my external hard drive off the desk. Fortunately, I have a system set up to make regular backups. I don't think I lost any files. But I did have to buy a new hard drive, and now I have to make sure that my backup system has been reconfigured to keep things backed up. I also take another precaution. A few years ago, my sister and I each bought a portable hard drive. We back up our computers onto the drives, and exchange drives when we see each other. If I ever lose both my laptop and the backup that's in my house, I will be able to retrieve all but the most recent files from the backup that's stored at my sister's house. Time: I'm planning on 1 hour, plus the time it takes to create the backups. It sometimes takes me a couple of tries to get things set up so that everything I need is backed up.

Warranty/use and care manuals: I have a drawer where I toss all those warranty cards and instruction books that seem to come with everything we buy. I'll take a quick look through that drawer, looking for items that I no longer own, things I've owned long enough that the warranty is expired, or items for which I don't think I'll ever need to read the manufacturer's instructions again. Time: 15 minutes.

Shred: A few years ago, two young nieces came to visit. They thought putting papers through the shredder was great fun. It was a game to see whether they could feed it so that it never shut off. If I can't find a gullible young relative to help this year, I will either do it myself or save the papers until my town has its local shredding event in April. Time: TBD.

The approach I've outlined above only applies to records that I do NOT need for income taxes. Anything that relates to income taxes goes into my Income Tax folder for the current year. When my taxes are done, all the documents and tax forms go into an envelope labeled with the year, and into a box in the basement. I keep all those documents for seven years. Some documents will be kept longer: ones about the sale of our previous home (before the rules changed in 1997), the tax form showing that I made a nondeductible IRA contribution many years ago, and some investment records.

How long to keep records: The Federal Trade Commission has a great infographic about when to shred. Chapter 1 of IRS Publication 15 has a section about recordkeeping for tax purposes.



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