Decluttering Your Finances

With a few changes and some organizational tools, anyone can get a better handle on money management.

As the new year embarks upon us,  it’s a great time to think about what to do differently to declutter your life and get more organized. The benefits aren’t just a cleaner desk or more closet space. According to studies by the Mayo Clinic, amore organized life actually helps individual minimize stress and improve quality of life.

Wondering where to start? One of the greatest sources of clutter and confusion, say the experts, is finances. A desk or kitchen countertop piled high with bank and credit card statements makes it harder to manage your money-or even to know how much is owed and when.

But with a few simple changes and some inexpensive organizational tools it’s easy to get a handle on financial clutter. The first step is obtaining a realistic picture of your spending and borrowing.

1)     CREATE A SIMPLE BUDGET

Do you know how much money is coming in-and going out-each month? Having a firm grasp on that simple equation is the first step to establishing order when it comes to your finances. And with a better handle on expenses and cash flow, it’s easier to stick to a budget-and start the new year off financially fit.

2)    ESTABLISH BILL-PAYING PLAN

Most banks give customers the option of setting up an online bill-paying system, thereby saving you the hassle of writing out a paper check for each creditor. And remember: A bill doesn’t have to be paid the day it arrives. Financial pros say it’s better to schedule a monthly, or even biweekly, block of time to review and pay bills.

3)    KEEP BILL STORAGE SIMPLE

According to the organization experts, all it takes is a 13-pocket accordion file folder to corral a year’s worth of paid bills. Simply label each of the tabs with the name of the month and leave the last one empty for the year’s tax return. Once a bill is paid, file it in the appropriate month along with credit card receipts and bank statements. Not only does this give you a quick way to track payments, but it also provides easy record keeping come tax time.

4)    WHAT TO KEEP

Do you have a box in the back of your closet with canceled checks going back to the 1980s-just in case? Bill statements not needed for taxes can be tossed or shredded as soon as you have confirmation that your payment has been credited to your account.  Receipts for major purchases such as appliances, autos, and furniture should be kept for the life of the item in case you need to file an insurance claim. Tax experts recommend keeping tax returns for seven years. Decluttering your finances will not only save your time and stress-it can save you money as well.

           

THAT’S A KEEPER

How long to hold documents?

One Year: Unless needed for tax purposes, then keep for seven years. Paycheck stubs, utility bills, canceled checks, credit card receipts, bank statements.

Seven Years: Brokerage statements, income tax returns, receipts, cancelled checks and other documents that support income or deductions on tax return, purchase confirmations and 1099’s.

Hold While Active: Contracts, insurance documents, stock certificates, property records, warranties, stock records, records of pensions and retirement plans, property tax records and disputed bills, home improvement records

Keep Forever: Life insurance policies, wills, mortgage records