Photo by shoothead.

Why Organize Financial Records?

Not only can you be a better financial planner with an organized archive of your financial documents, there a few times in life you might need those records.

If you’re not sure how long you might need to hang onto a bit of financial info, consider three years to be the minimum.

Tax Audits – Even if you cross your Ts on your tax returns, the taxman can come knocking. IRS auditors may ask to see up tax returns for the previous three years, plus supporting documentation.

Loans – When you apply for a mortgage, and occasionally other kinds of larger loans, lenders may ask for proof of your income and/or bank and investment account balances. Often, they may want to see more than just your more recent tax return. This shows lenders whether your income is steady, as windfalls such as bonuses, inheritances, or winnings might inflate a single year tax return.

Financial Aid – Applying for college financial aid often requires at least two years of tax returns and account balances.

How I Organize Financial Records

Though I am keeping more and more of my financial records electronically, I still keep hard copies of any tax-related documentation, including payment stubs for excise and property taxes. I also hang onto receipts for major purchases, warranties, auto maintenance, etc.

To organize my physical papers, I use thin folders or loose-leaf binders filled with clear plastic sheet protectors, one per document. I then label the front of each “tax returns 2001 – 2008”, “auto expenses”, etc.

The rest of my financial records are kept electronically. This includes bank statements, cleared checks, and credit card and loan statements. Every January, I export all of my statements as .CSV (comma separated value) files, which all of my banking sites allow me to do. I then drop them into designated excel worksheets, divided by account. In each file is a separate tab for each year. Finally, I burn the files to a CD and place it in a fire proof box.

And that’s it!

One thing I’m also experimenting with is the new service Shoeboxed, which scans any receipts that you mail to them (for a modest monthly fee). With their help, it’s possible my financial records will be 100% electronic within a year or two.

How do you organize your financial documents?

In this Quicken Online Edition Review, I take a look at some of Quicken Online’s features, strengths and weaknesses, and possible uses.

What Quicken Online Offers

For just $2.99 per month (after a 30-day free trial), Quicken Online will automatically update itself from your bank accounts and credit cards every night, provide bill payment reminders via text message or email, and allow you to create and track detailed personal budgets, all while protecting your financial information with state-of-the-art security features.

Quicken Online allows you to view invoices, transaction details, account balances, and more anywhere you can get online. You can also create charts and graphs that quickly analyze your spending habits.

What Quicken Online Lacks

Due to its fairly low price and younger target audience, users experienced with Quicken desktop software will find Quicken Online to be fairly “light” on features. Quicken Online does not support investment tracking, nor can it export data to Quicken Desktop or integrate with TurboTax. Expect some of these features to be added, however, as Quicken determines what users want.

Quicken Online Security

Quicken Online is as secure as any financial institution’s website, perhaps even more so. Quicken requires more than just a username and password to login to your account. In addition, Quicken will not store your account numbers, and SSL and 128 bit encryption makes your financial data unreadable as it is transferred to Quicken online.

The only downside to all this security is that it can be difficult to initially link some bank accounts to update Quicken. (Though this is not unique to Quicken – it also happens with similar programs like Yodlee, Mint, and Mvelopes). The good news is once your accounts are linked, updates will be automatic going forward.

Final Thoughts

Quicken Online is the perfect introduction to using technology to manage your money, and a great deal for just $2.99 per month. If you’ve never used Quicken before, I strongly recommend you try Quicken Online Edition for free.

You may also want to compare Quicken Online to Mvelopes, another online budgeting tool that also offers a free 30-day trial.

You can faithfully crunch numbers once a month, only to find out you’re consistently spending more than you planned. I know, because it happens to me. That’s why I find breaking your monthly budget into a weekly budget can be really helpful.

“Weekly Planner” by Graham.Ballantyne.

Why a Weekly Budget Helps

For me, figuring out how much money I have available in a week is much more manageable than a whole 30 or 31 days.

While it’s true a lot of our expenses recur monthly; most of these expenses, like our rent, mortgage, or car payment, are fixed.

Unless you really have an income shortfall and don’t earn enough to cover your monthly bills, it’s not these fixed costs that blow our budgets – it is variable, sometimes discretionary spending like groceries, clothing, gas, and entertainment.

For example, if you set a budget for the month of, say, $150 for dining, and blow more than half of that on a nice dinner the first week of the month, it can be really tough to keep track of how your lunches out the next couple of weeks are eating away at that budget.

But if you break that $150 into approximately $34.60 per week, you might see that your dinner the first week meant that you would have to go the next week spending only half of your budget, or $17.30, on any weekday lunches or takeout.

Another benefit of having a weekly budget is making weekly, rather than monthly, credit card debt payments or savings contributions. Doing this can actually save you (or earn you) additional interest. Although the amounts are generally small, weekly contributions are also helpful psychologically, as you can begin to see your continuing progress towards your financial goals that much sooner.

How to Create and Use a Weekly Budget

You may not wish to bother breaking down monthly fixed expenses into weekly amounts, but doing so can be a good exercise in seeing where your money actually goes. If you’re paid weekly or bi-weekly, breaking monthly bills into weekly amounts can also help you set aside funds from each paycheck to go where they are supposed to.

Just in case you forgot the shortcut for changing monthly amounts into weekly amounts, multiply the monthly figure by 12 and divide by 52.

Whether or not you break down your monthly bills, the number you definitely should break out is the money you have left, after your monthly bills, debt repayment, and savings, that you spend on everything from food to gas to entertainment. After all, these are the areas in which we are most likely to overspend.

There will be times when you are going to go over an amount on your weekly budget. For example, if you only fill up your car three times a month, one fill up will be more than your weekly gas budget. That’s OK, as long as you subtract the difference from the following week. Similarly, you can roll over any money you don’t spend into the following week.

When you do this with a weekly budget, you begin to see very quickly how each purchase is a trade-off. Will you want a nice dinner this Friday, or a couple of take-out dinners next week? Do you want to drive down to see your friend 100 miles away this weekend or pop around town going shopping?

Do you budget weekly? How has it helped, and what have you found challenging about it?

Next Wednesday check out the budgeting topic to read: “Budget Busters: The Expenses You Never Think About”. Need a reminder? Please subscribe to my RSS Feed.

In a nutshell, Shoeboxed lets you organize receipts in three ways: by emailing electronic receipts to a unique, secure shoeboxed.com email address, by manual entry, or by mailing in paper receipts to be scanned.

Once your receipts are entered, you can track your spending with charts and spending analysis, create a budget, export your data to Quicken, and even share your spending patterns with friends.

Shoeboxed offers four plans to help you organize receipts: free, basic, classic, and express.

The free plan gives you access to unlimited storage, manual entry, emailed receipts, and all the analytics tools, you just can’t mail-in paper receipts to be scanned.

The basic plan gives adds mail-in paper receipt scanning, up to 50 receipts per envelope, for $9.95 per month, or $109.45 per year (1 free month).

The classic plan provides adds free prepaid mailing envelopes for your paper receipts, the ability to send unlimited receipts at a time, and guaranteed two-day processing time, all for $19.95 per month or $199.50 per year (2 free months).

The express, or premium plan, provides unlimited receipt scanning, guaranteed one-day turnaround time, and premium support for $59.95 per month or $599.50 per year.

All plans come with a 30-day money back guarantee, so why not give Shoeboxed a try today!?

Next Wednesday check out the budgeting topic to read: “How to Live By a Weekly Budget”. Need a reminder? Please subscribe to my RSS Feed.

“$20,000″ by Johnny Vulkan.

The point of having a monthly budget is to set a maximum amount of money you want to spend that is less than your income.

Most of the time, we compartmentalize that money by category (housing, transportation, food, debt, etc.), but the overarching goal is still to spend less overall that we bring home.

As I wrote last week, there are no shortage of tools – from intricate personal finance software packages like Quicken and MS Money to online tools like Mint – that will let you arrange your credit or debit transaction into categories, set limits, track your spending, and even create nice little graphs and reports showing where your money is going.

That’s all very impressive, but the bottom line is: using these tools, do you actually stick to your budget?

Chances are, unless you enjoy spending a few hours each week going over your expenses and tweaking how they show up in your budgeting program, fancy budgeting programs may not help you control your spending, they may just let you know you have spent too much when it’s already too late.

Budget With Cash Instead

It’s true our economy is getting less cash-friendly. I see more people swiping cards to pay for $2 coffees than paying with cash (it may be faster), and the last time I paid for something that was over $200 in cash, the clerk had to do five minutes of paper work for the cash transaction!

Still, cash has the powerful benefit of being tangible. And tangibly finite.

When we have $100 in our pockets to cover spending for the next week or two, we can always see and touch how much we have left. In addition, if we are ever tempted to overspend, if we make ourselves go to an ATM to take out the cash, we make ourselves ever-more cognizant of our decision to spend that money. Not so when we simply swipe our debit card and go.

Also, cash doesn’t bounce. If you’re not careful of keeping your checking account balanced, you could bounce a debit card transaction, resulting in nasty overdraft fees.

While it is possible to earn rewards by using a credit card responsibly, you might ask yourself: Do these rewards make up for the amount I might be overspending because I use a credit card instead of cash? Even if you pay your balance in full each month to avoid finance charges, did you buy something last month you wouldn’t have if you had to go to the ATM to get the dough?

Tracking Cash Spending

True, another benefit of debit and credit cards is that they provide a neat little summary of your transactions each month. There’s no work involved in remember what you spent where.

Spend with cash, and there is an extra step involved. It’s not difficult, however, as there are little pieces of paper available everywhere you spend money. Receipts! You can now even mail in your receipts to be scanned by a service like Shoeboxed so you have an electronic record of your cash spending.

When you track your spending with cash, it does take a little bit of time, maybe twice a month, to jot down your purchases. I have found, however, that even when using computerized budgeting tools that automatically pull credit and debit card transactions, I needed to spend just as much time tweaking the categories each transaction was filed under. So six of one, half dozen of the other, I guess.

What do you think? Do you – or have you ever tried – budgeting and spending in cash? How did it go?

I post to the budgeting category every Wednesday. Next week stop back to read: “Receipts: Do You Keep Them or Chuck Them?”. Need a reminder? Please subscribe to my RSS Feed.