How to Properly Store and Organize Your Financial Records

As the years pass and you move through the various phases of life your paper trail grows and grows. These days the trail is digital as much as physical, but you still have to contend with decades of records. If you own a home or run a business record-keeping is incredibly important, but absolutely everyone must treat their financial records with care. Sloppy organization can lead to tax issues and missed bills, and unsafe storage methods will leave you open to identity theft and fraud. Here are a few tips to help you properly store and organize your financial records.

First off, make sure you keep all of your financial records together. Regardless of the system you use, everything should be in the same place. The best choice is to get yourself a single filing cabinet big enough for all of your storage needs. You’ll want to keep financial records for at least five years, but sometimes as long as ten years before getting rid of them. With requirements that long term, you want to keep things simple. The more little folders and corners you use to store things, the more complicated it gets. If you need more space than you have, pick up banker’s boxes for your overflow.

Within the boxes or cabinets you’ll want to divide everything by category. Get as specific as your needs require, and organize either alphabetically or by type as you see fit. Keep all of the pending records in the front, including any bills that have yet to be paid. Then you can move things towards the back as they are reconciled. And make sure you save all of your receipts. This is crucial if you’re a small business owner, as you can claim expenses by category only if you have the paper trail to back it up. Set up a separate folder for each month.

At the end of every month you should go back and square away your accounts. Make sure you pay your bills all at the same time, and file away any statements or paper bills as you complete them. Sort through your receipts for the month and tally anything you can claim as an expense in a spreadsheet, so you are ready for tax season. If you want to insure you maximize your tax return and minimize your stress this monthly strategy will serve you well.

Proper storage is important for insuring the security of your financial records. You might want to use a filing cabinet that locks, and don’t keep your online passwords written down anywhere. When you are ready to throw out financial records make sure you shred them as well, so you don’t run the risk of identity theft. You should also back up your records either on a hard drive or in a password-protected cloud storage account, which is probably what the folks behind would recommend. Keep that password close to the vest and change it frequently. But you must have a backup in case a fire or some other natural disaster takes out your physical records.

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