Managing Money:
Creating a Record System
Where to Keep Records
A safe deposit box — There are some records and belongings that are costly and may be hard or even impossible to replace. Preferably, these should be kept in a safe deposit box at the bank. Another option might be a fireproof safe or filing cabinet in your home. Unfortunately, few of these are truly fireproof or theft-proof. Some of these important papers are car titles, birth certificates and marriage certificates.
Current records — You will need a temporary keeping place, such as a cardboard box or set of file folders, to keep receipts, paid bills and notes of non-receipt cash payments, such as gasoline. You also may want to write these types of things in a home account book or some other sort of record of household expenses.
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Record Keeping Tips from the IRS |
Permanent files — At the end of each year, clear out your current files. Tax time usually is the most convenient time to do this. Throw away items that are no longer of any value such as sales receipts for groceries. You already should have recorded them on your expense sheet or in the home account book. Any important papers should be moved to your permanent filing system. As you look for items you need at tax time, throw out the things you no longer need. Transfer items you might need in the future to your permanent files. Items, such as tax returns and bank statements, are an example. For more information about documents to keep in your files and how long you should keep them, consult the Record-Keeping Tips from the IRS Work Sheet and Keeping Financial Records Work Sheet.
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Keeping Financial Records |
Setting up a household filing system does take some time. There really is no right or wrong way to do it. Every household is different. You may need to experiment a bit before you find the system that best fits your needs.
The Household Filing System Work Sheet suggests a possible system you might start with and then adapt to fit your family's needs. You also will want to consider having:
- Active files for records that are used at least yearly or that may need to be reviewed without much notice. For example: checking the number on an insurance policy.
- Dead storage, which usually includes records that might have to be reviewed at some point in the future but are not normally needed in the course of the year, such as income and tax records from five years ago.
Where Are Your Valuable Papers?
It is important to keep complete records. You also want to be certain that you or your family members can locate valuable records and papers. Also think about emergencies. Are those papers safe? If they were lost, stolen or burned, would you be able to replace them?
Make a list of the location of your important papers. It will be very useful to you and your family members if papers are lost or destroyed. You should make duplicate copies of the list when it's complete. Keep it in a safe deposit box or give it to a friend or relative away from your place of residence. Be sure you update it when something changes and replace the original with new information.
Another good idea is to take inventory of your personal property. Such records could be helpful in the event that you would need to file an insurance claim. It is recommended that you check with your insurance agent or broker for company requirements of proof of purchase and/or ownership of personal property items. In some cases, receipted bills or sales slips are required. In other cases, a written inventory and/or photographs are adequate documentation. If you have access to a camcorder, make a videotape of your home and valuable contents. No matter how you choose to make your inventory, the task may be a little easier if you tackle it a little at a time. For instance, take inventory of one room at a time.
Organizing all of these documents, receipts, warranties and other records may seem like a real chore. It will take some time to gather everything together. But just think how much easier it will be to do at a leisurely pace now, instead of in a panic in an emergency situation. There may come a time when other family members will need to manage things for you. Having all the necessary papers available for them will be a great help and will avoid a lot of potential problems.
Take the time right now to help yourself, your family and others by taking charge and getting all of your very important papers in order. You'll be glad you did. And, you will certainly feel a sense of accomplishment when the job is complete.
References:
Kratzer, C. (2004) Managing your money: Keeping records in order. Cir. 596. New Mexico Cooperative Extension. Las Cruces, NM.
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