This week’s e-Strategies begins a series on organizing and maintaining your household and financial records. Today’s complicated lifestyle creates quite a challenge in keeping up with family records, the purchases and investments you make, and the services for which you pay. However, knowing where important papers are located and being able to put your hands on them easily, can be the difference between money lost or gained.
What best characterizes your filing system?
- Shoebox in a closet
- Dashboard of the vehicle?
- Paperwork stuffed at random in a notebook?
- Accordion or expandable file?
- Filing cabinets with file folders?
That probably covers most people. But despite the location of your records, the key is to be able to find them easily, within 5 minutes. Have you ever spent more than 20 minutes looking for
- An automobile title?
- A birth certificate or passport?
- A credit card account number and customer service phone number?
- Receipts for preparing your tax return?
- Bills paid in full?
If so, then your system for storing records may need improving. Over the next several issues we are going to give you some ideas on how to eliminate the frustration and difficulty that comes from poorly managed paperwork. Even in today’s high tech age, paper records are important to you and your family. If someone else ever needs to step in and manage your affairs, due to a family illness, crisis, or death, an organized record system will be extremely helpful to them.
Benefits of a well-ordered paperwork system
1. Having easily accessible records means less time preparing income tax return. Your tax pro will tell you it is much easier to substantiate your deductions from organized receipts and records.
2. You will know with confidence which information you need to keep and which you can discard. Most people keep too much, rather than not enough, making it difficult to find the truly valuable paperwork.
3. If your home is destroyed or burglarized, having irreplaceable records stored safely can help get adequate insurance compensation and retrieve lost or stolen items. Also keep an inventory, perhaps a video, of current personal possessions.
4. In the event of death, injury, or an emergency, records will be important in settling an estate, filing insurance or benefit claims, and reducing stress for loved ones.
Example: One family involved their attorney and CPA in creating a detailed task list of what would take place upon the death or deaths of the husband or wife. The list included where to find specific records, who to call, the location of safe deposit box keys, who needed to be notified, and so on. They update the plan every year with their professional advisors and make sure their children know who to call. The result? An exact plan that removes fear and uncertainty during a difficult time.
5. Records provide proof of ownership and evidence certain transactions took place. Having these records can save headaches when someone makes a mistake about these facts or official documents are destroyed.