May 22nd, 2008

How I Organize My Financial Records (And Why You Should)

By David Weliver

You may never need to go back and see how much you spent on gas in March, 2006. But what if you did? Organizing your bank statements, receipts, and tax returns can save you headaches down the road. Here are a few reasons you should organize your financial documents, and the ways I get it done.

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?

Related Posts

1. Organize Receipts with Shoeboxed: A Closer Look at Shoeboxed.com
2. Shoeboxed.com: Receipt Organization a la Netflix
3. How to File for a Tax Extension
4. Identity Theft: How to Prevent It and Stop Worrying
5. A Prosper Update: One Year as a Prosper Borrower

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2 Responses to “How I Organize My Financial Records (And Why You Should)”

1. Dan Englander says:

   May 22, 2008 at 7:53 pm

   Glad to hear that you are liking Shoeboxed Receipt Mail-In! If anyone else is interested in getting their paper receipts digitized without having to do any of the scanning yourself, check out our site! I’m happy to answer any questions you have at help@team.shoeboxed.com.

   Dan Englander
   Shoeboxed.com
2. Fabulously Broke says:

   May 31, 2008 at 11:33 am

   I scanned in every single one of my financial documents and I only keep the ones I HAVE to keep in a hard copy.

   Thanks! I’m linking this in my next round of link love