Five Simple Steps to Organizing Personal Finances

As kids head back to school, we start to think about the importance of developing systems to keep their papers, permission slips and projects organized.

Managing financial papers for a household can utilize many of the same systems, since they can be as overwhelming as the never-ending flood of school paperwork, when you consider the amount of monthly bills, receipts, paystubs, account statements and other essential paperwork received by a household on a monthly basis.

It’s easy to lose track of everything you need, but a good organizing system can keep things right at your fingertips.

Taking a few simple steps toward organizing your personal finances is a great way to get on track with your spending and feel more secure with your finances.

1. Establish a central location for access to all your financial documents. Create a list with important numbers for all credit card companies and account information. Include which items are stored in safe or safety deposit box at your bank.

2. Invest in a shredder for your home or office. “Dumpster diving,” or rifling through trash cans for personal information, is a tactic used by identity thieves. You are taking a terrible risk if you don’t shred sensitive material. If your shredder can’t handle plastic, use scissors to cut up expired credit and identification cards before discarding them.

What should I shred? In short, destroy all sensitive information including junk mail and paperwork that includes:

· Account numbers

· Birth dates

· Passwords and PINs

· Signatures

· Social Security numbers

To protect your privacy, you should also consider shredding items that include:

· Names

· Addresses

· Phone numbers

· E-mail addresses

3. Determine what you should keep, and for how long. Here’s a handy guide:

· Tax Records: Seven years, to be safe. The IRS has three years to audit your return if the agency suspects you made a mistake and up to six years if you likely underreported your gross income by 25 percent or more.

· Pay Stubs: One year. Match them up to your W2 form, then shred.

· Bank Statements: One year. But hold onto records related to your taxes, business expenses, home improvements, mortgage payments and major purchases for as long as you need them. Many financial institutions now provide the option to receive your bank and credit statements online instead of by mail.

· Credit Card Statements: At least 45 days. The rules here are similar to those for bank statements; hang on to those you may need for your taxes or as proof of purchase. Shred the rest after you’ve confirmed payment.

· Medical Records: At least a year, but often longer. Keep medical bills for at least a year in case of a dispute over a reimbursement. Some experts suggest keeping other records for five years from the time treatment for the symptoms ended.

· Insurance Records: Keep policy information for the life of the policy plus an additional five years.

· Utility and phone bills: Shred them after you’ve paid them, unless they contain tax-deductible expenses.

· IRA Contributions: One Year. You can shred quarterly statements as soon as you match them with your yearly statement.

· Home Purchase/Sale/Improvements: Until six years after you sell. Improvements you make and expenses such as your real estate agent’s commission are factored in when you sell your home, lowering your capital gains tax.

· Warranties: As long as they are current. Expired warranties can be recycled, unless they contain personal information.

4. Take advantage of online billing and payments.

· Even if you have the money to pay certain bills, it’s easy to forget about them and incur late fees. On your calendar keep track of the different payments you make each month and when they’re due to avoid unnecessary fees. You can even set up online reminders.

· Nearly every credit card company, bank and utility provider offers an online payment option these days. If you opt in, the statements you’ve been receiving in the mail will now show up in your inbox.

· For some people, paperless is a great option. For others, the lack of a physical bill can mean no more reminder that the bill is due. If you sign up for online banking, make sure that you set up due date reminders for yourself and that e-statements aren’t getting caught in your junk mail folder.

· Many billers with online payment services offer the option to set up recurring payments, which can take the stress out of remembering what bills are due when. If you choose this option, make sure your bank account regularly has enough of a balance to cover your payments to avoid overdraft fees from your bank.

5. Balance your checkbook.

· Online banking makes it easy to forget about balancing your checkbook when all of your purchases are available online almost as soon as they’re made. It’s important to remember, however, that banks and retailers sometimes make mistakes, and they could be costing you money. You should keep track of your purchases, especially if you’re spending more than usual during the back-to-school shopping season, and check them against your bank statements.

· It’s also important to check your accounts regularly for unanticipated fees and unauthorized activity.

Spending some time getting your finances organized will pay off in time and money saved, each and every month.

Jane Ensley manages the Enumclaw branch