The first time I work with a client on their financial planning or investment management can sometimes be an interesting challenge. A few clients have their records, statements, and tax returns scattered all over creation and it can be cumbersome for them to collect all of their pertinent information. One of the first things we talk about is getting organized. Organizing your financial records should be a cyclical process rather than a one-time event.
You'll need to set up a system that helps you organize incoming documents and maintain existing files so that you can easily find what you need. Here are a few tips.
Create your system
Where you should keep your records and documents depends on how quickly you want to be able to access them, how long you plan to keep them, and the number and type of records you have. A simple set of labeled folders in a file cabinet may be fine, but electronic storage is another option for certain records if space is tight or if you generally choose to receive and view records online. No matter which storage option(s) you choose, try to keep your records in a central location.
Whether you receive financial statements through the mail or electronically, set up a collection point such as a folder or a basket. Open and read what you receive, and decide whether you can file it or discard it. If you receive statements electronically, pay attention to any notifications you receive. Once you get in a routine, you may find that keeping your records organized takes only a few minutes each week.
Keeping your financial records in order can be even more challenging than organizing them in the first place. Let the phrase "out with the old, in with the new" be your guide. For example, when you get this year's auto policy, discard last year's. When you receive an annual investment statement, discard the monthly or quarterly statements you've been keeping by shredding or deleting. It's a good idea to do a sweep of your files at least once a year to keep your filing system on track (doing this at the same time each year may be helpful).
Don't just throw hard copies of financial paperwork in the trash. To protect sensitive information, invest in a good quality shredder and destroy any document that contains account numbers, Social Security numbers, or other personal information. If you're storing your records online, make sure your data is encrypted. Use strong passwords with double authentication, and back up any records that you store on your computer. Better yet, use cloud storage so that records can't be taken if your computer is hacked or stolen.
Hopefully this will help you make the process less stressful when you decide to work with a financial planner and financial advisor.
Alan Battles is a Salt Lake City, Utah fee-only Registered Investment Advisor (RIA) fiduciary and financial planner. Brighton Wealth Management, Inc. specializes in providing objective financial planning and investment management to help clients build, manage, grow, and organize their assets during life’s transitions.
The information in this material is not intended as investment, tax, or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.