Clean Desk, Clean Finances -- 5 Steps to Streamline Your Money Management

Why do so many of us cling to paper-based systems to keep track of our money? In truth, some paper is necessary, but the most common response may be habit. As you're reassessing those habits, keep these five steps in mind.
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As lives change, finances change. Every few years -- or when a major life event like a marriage, divorce or birth happens -- it makes sense to reevaluate the way you track your finances.

It's an idea that goes beyond saving time, money and physical clutter. As an added benefit, it will hopefully bring greater clarity to your financial decision making over time.

Banks, investment companies and a host of businesses and utilities now offer paperless options for account statements, sales receipts, bill payments and more. Personal finance software and specialized websites have made real-time financial tracking, budgeting and planning a reality. Cloud-based solutions make it possible to store this data far from any physical desktop.

So why do so many of us cling to paper-based systems to keep track of our money? In truth, some paper is necessary, but the most common response may be habit. As you're reassessing those habits, keep these five steps in mind:

Let financial goals shape your system. A 20-something person's financial objectives might be paying off student loans, starting to put a little away for retirement and saving for a home down payment. A 50-something might be thinking about moving to a smaller home to help maximize their retirement savings and investing. Current needs and future goals should be considered first and shape the record-keeping and tracking you'll need to do. Consider talking through these objectives with a financial or tax advisor. Get their feedback on possible apps, financial management software and paper-based record-keeping that can streamline your decision-making.

Create a trail for loved ones. If something were to happen to you, could a trusted friend or family member navigate your finances? As you're reorganizing your record-keeping to meet your goals, build an easy-to-access guide for designated friends or relatives you've chosen to handle your affairs if you die or face a debilitating health emergency. Planners call this an ICE file -- short for "In Case of Emergency," and keep in mind everyone should have this information in place, not just seniors. The best ICE information is indexed and shared with designated representatives in advance so they can find the following:

  • Contact information for doctors and financial and tax advisors
  • Locations for all essential estate documents including your will, health and financial powers of attorney, including any letters of instruction you have written to accompany these documents
  • All ownership documents for real estate, autos and other major assets
  • Usernames and passwords for Internet-accessible financial accounts as well as personal websites and social media if such items need to eventually be updated or removed
  • Contact information and statement access for all savings, checking, investment and debt accounts, particularly checking accounts in joint name so the financial power of attorney can pay bills
  • An up-to-date list of monthly bills that need to be paid on time
  • All insurance information including health, home, auto, disability and business policies

Know what to keep or shred. Ultimately, document storage or disposal depends on personal needs, but here are some general rules:

Keep: All tax-related documents for up to seven years, including annual tax returns; statements that show a gain or a sale of a security or the purchase or sale of a major asset like real estate; mortgage documents, vehicle titles and insurance policies; multiple copies of birth and death certificates; marriage licenses and divorce decrees; deeds and title documents.
Shred: With identity theft on the rise, it is generally better to destroy financial documents before they go in the garbage. After recording all transactions, immediately shred the store and ATM receipts and credit card statements. After a year, shred monthly bank account statements unless you or a family member are close to qualifying for state Medicaid benefits. States generally require applicants to save bank and investment statements for anywhere from three to five years to qualify.

Protect your information. Once you know which documents need to stay in your possession, decide the best way to protect and access them. Estate documents and directives should be kept in their original paper form in a safe, accessible place with copies as advised. Other documents can be digitally scanned for printout as needed. Many all-in-one printers have a document-scanning feature and today, there are scanning apps available for smartphones as well.

Design an effective backup system. What would happen to your financial data if you suffered extensive home damage or your computer failed? If you are wedded to paper documents, consider keeping copies at a secure offsite location or with a trusted friend or relative. If your record-keeping is digital, you have the option of keeping data on an external physical hard drive or through a variety of Internet-based services that store data digitally. This is also known as cloud storage. As you consider these options, make sure to safeguard all password information and regularly check your credit reports throughout the year to monitor potential information breaches.

Bottom line: De-cluttering one's financial life goes well beyond tossing out old monthly statements and receipts. It's an opportunity to review your long-term financial plan and build a record-keeping system that saves time and money and helps you reach your goals.

Jason Alderman directs Visa's financial education programs. To follow Practical Money Skills on Twitter: