My System For Managing Financial Documents

Several people recently have written to me asking how I manage my financial documents. I have a very simple system for managing them that works well for me, but you may find David Bach’s FinishRich filing system quite useful for you.

My system starts off with one enormous binder, an accordion folder with eight smaller folders inside of it, a whole lot of separator pages with tabs on them, and a three hole punch. The purpose of the accordion folder is simple: I use it to keep my old tax returns in (with all of their necessary supplemental documents). I have one folder for each of the last eight years, and so when I add a new one, I know I can remove the oldest one. I keep these separate in their own binders because some of them have a lot of supplemental material that I want to keep together in one place and I don’t really trust a binder to hold them together.

So what about that big binder, the tabbed separators, and the three hole punch? In that giant binder, I have a section (that begins with a separator page) for each specific type of financial statement and record. Whenever I get a new statement, I put it in this binder; if the statements don’t already have holes in them (many do), I just use the three hole punch and punch holes in the side of the statement. I put them in chronologically, with the newest statement at the top of each section.

You might think that that’s a lot of work, but once you get used to the system, it actually saves time. It’s amazingly easy to just grab the binder, flip through a few pages, and find out whether or not you’re doing better on electric bills since you made some changes, or when you’re trying to estimate a budget for the coming year and want to see statements on everything for the past few years to estimate things. I can’t even imagine tackling such a task without a good organization system.

It’s a nice weekend project to clean up that old shoebox full of statements and convert them into an organized binder. When I did this, I simply sorted the statements by account, sorted each group chronologically, created a section in the binder for that statement type, then busted out the ol’ three hole punch and started punching away.

When can I get rid of old records? My personal feeling is that you should keep everything for seven years running. So, for me, I just tossed out my 1999 statements at the start of 2007 with a big paper shredding bonanza. Everything newer than that should be kept, simply so you have an accurate picture of everything financial.

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  1. karla (threadbndr) says:

    Better pull the investments out into a seperate “keep until you sell the investment and pay taxes on your gains” binder. That binder should also have all the receipts for improvements on your real estate – again for the tax impact when you sell the property.

    Those categories may need to be held onto longer than just the standard 7 years.

  2. Martin says:

    Yeah, my weekend project is to organize all our financial documents. Right now I keep them in a box, but not in any specific folders. Looks like I will need a run to … BIG LOTS for the supplies.

  3. Mike says:

    I have a similar system, but it is hanging files in a file drawer of my desk. One folder for bank statements, one for taxes, credit card statements, etc.

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