31 Days To Fix Your Finances, Day 27: Keeping Good Records

The Simple Dollar offers a month-long plan for fixing your finances. All you need is an open mind and an hour each day.

Now that you’ve built a value-oriented budget and evaluated your life in terms of your rediscovered central values, it’s time to take care of a little bit of housekeeping. The first part of this is keeping good records, something that seemed overwhelming and unnecessary to me at first. Once I finally broke down and did it, though, I found it to be a fantastic way of feeling more in control of my finances and my life as a whole.

Why keep good records? First of all, good records can protect you against errors. If you have adequate financial records, you’re prepared for an audit, prepared to apply for a home loan, and prepared to verify anything that anyone might claim. Second (and actually more interesting most of the time), good records enable you to analyze your financial life. With everything organized, you’re prepared for any sort of spending analyses you may wish to do.

How do I organize them? There are several strong organizing systems out there; spend some time looking at several of them and choosing one that works for you. Popular ones include David Bach’s FinishRich filing system and the LifeFolio filing system. I also describe my own system. You might also want to use this handy checklist of items that you should file.

What materials do I need? If you’re just getting started, a pile of folders and a box will do the trick; later on, if the system is working for you, you might want to invest in a filing cabinet. I wouldn’t invest in one, though, until you’re sure that you’re actually using the system with regularity.

I don’t know where to start! Help! When I started, I was completely overwhelmed with all of the papers stuffed into dresser drawers, desk drawers, and boxes. Whenever I thought about getting it done, I would quickly come up with something else to do. But when I finally sat down and did it, the process wasn’t too bad. Here’s what you do:

Set aside a block of time to do it. This is a great afternoon activity, so just pick an afternoon to get your items in order. Make sure you have a large box and plenty of folders before you begin.

Find a place with plenty of space to spread out. I used the living room floor.

Make a pile for each different type of record, and use the opportunity to discard everything inessential. You’ll probably wind up with a lot of piles. Don’t worry about any sorting within a pile, just get through all of the things you have built up. You should also be throwing away all inserts, envelopes, and other unimportant things.

Sort each pile by date. I like to have the newest on top, so I sort them in reverse chronological order.

When you’ve sorted a pile, put it straight in a folder, label it, and put it in the box. As you see the box filling up with organized records, you’ll feel a lot better about things. For me, it was rather exhilirating to watch things slowly becoming ordered where there was only chaos before.

Tomorrow, we’ll look at a topic that no one likes to think about.

Ready? Let’s continue on to the next day.

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2 thoughts on “31 Days To Fix Your Finances, Day 27: Keeping Good Records

  1. Joann says:

    Just curious about why you suggest keeping records in boxes, instead of using financial software like Quicken. Quicken, for example, allows you to scan receipts and attach them to the entry recording them. I love having everything in once place and being able to access it at a moment’s notice.

  2. Melody says:

    I would imagine it’s for the same reason that I insist on keeping actual customer-related papers from our home business, such as invoices, quotes, etc. Sure, I can scan them and even attach them to the customer record in my CRM software – but I live in Florida. And what happens in Florida?! Hurricanes sometimes, but most often we get ‘rolling blackouts’ and brownouts in the summer. Constantly. Having reliable power is a myth at least 4-6 months out of the year. I would much rather know I could instantly pull something out of a file, than be cursing about not being able to turn on the computer!!!

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