Quick way to manage your Personal Finance Documents

We all come across situations wherein our personal finances go beyond control. Despite trying hard to maintain it every month, we fail. This happens as we do not keep important personal finance documents at one place and update them on a regular basis. Due to this, our entire expenses of house get mixed up and we land up in trouble. To help you manage your expenses, we provide you with some simple tips that will ease the entire process.

Financial documents Filing system:

We have a lot of fixed expenses. Normally, we keep them wherever we want. Some of us keep every financial document at one place, without separating them from one another. Thus, while making payment, we end up losing track of what all we have paid. It is essential that we file every financial document, separately.

All important financial documents can be broadly divided into three categories:

1. Bills / payments due
2. Documents to keep
3. Documents to throw away

If you start to differentiate your entire personal finance related document under the mentioned categories, then it will ease your work. By this, you will not only be able to separate unpaid bills from the paid ones, but also can get rid of all those documents that are no longer needed.

Apart from this, you have to take a moment to read the next financial document you will get, and decide in which folder you need to keep it. This way, when you are in need of any financial document, you know where to find them, and under which category. You also have to keep reviewing those folders on a regular basis so that you can throw away unwanted financial document.  

Organize your personal finance documents:

The previous method will help you keep all your necessary personal finance documents at one place. But, this solely is not going to help you serve the purpose of organizing your financial documents. The next step you need is to divide your important personal finance documents among several others, like, tax return, insurance policy, mortgage document, investments and mutual fund account statements, and so on.

When you start to keep all the personal finance documents in their respective folders, you don't have to go through every personal finance document while searching for the particular one. All you can do is divide the folders among the sub-folders to ease your work. This might sound a bit confusing but there are several files with many sub-folders available in the market, and they may help you to serve your motive.

Once you have those folders and sub-folders ready, all you have to do is read the personal finance document as soon as you get and keep it in a respective folder. Generally, we tend to think that we will do it later and then we forget. Thus, it is advisable to carry out the process of differentiating your personal finance documents as soon as you get them.

Maintain a Personal Finance Diary:

Sometimes, many of us feel that we have paid a bill whereas that bill is still unpaid. In order to get rid of such confusions, it is advised to maintain a personal finance diary. You should keep details in this diary like the unpaid expenses and when you have made a payment. This way, you will have a record with you and this will help you to manage your expenses well. Not only this, the diary can also be used to refer to previous month's payment, whenever you need to know them.

Life of the personal finance document:

As we have fixed payments on a regular intervals, the questions arises is till when we need to keep the personal finance document? Some personal finance documents will loose its value and life after some period. This will depend on the personal finance document itself.

There are certain documents wherein you don't have to keep a copy of it for a longer period of time, whereas, in some cases, you need to keep the document until the motive is served. Thus, while taking a decision to throw away a document, understand well the need of it.

Following are examples of certain documents which you should keep for a longer period of time as compared to others:

Tax return: 

This is one such document which you should keep for at least seven years. During audits, you might like to go some 3-6 years back from the day you have filed. In such cases, it is advisable to keep these documents for at least 7 years to be on safer side.

Mortgage documents:

While buying a house, you need to sign a bunch of pages. You might not refer to them very often but still you should keep them, as they might turn out informative while selling the house or for any other purposes.

Bank and investment account statements:

Despite having a facility of internet, wherein you can take out statement of any given date, it is advisable to keep the copy of your bank statement till you get a next statement.

Bills and receipts:

If you're getting your credit card bills, it is advisable to keep them until you receive the next. Sometimes, there might be some errors, and if you have a previous copy, you can always refer to that. The same goes for the receipts. You should keep them till you receive a bank statement. This will help you to tally the amount; both in receipt and in the statement.

Keep your identity safe:

We hear about identity theft a lot. Thus, it is advisable to keep your documents safe. You may be receiving various offers from credit card companies and other such organization. It is important that you delete them sooner. Keeping them in your mail may lead to various troubles in case of theft.

The bottom line

Organizing personal finance documents is important and once you will start doing it you will realize how it makes your life easy. It is necessary that you keep all the necessary personal documents at one place as this habit will not only help you but also to your family, whenever they need it.

The author is Ramalingam K, an MBA (Finance) and Certified Financial Planner. He is the Director and Chief Financial Planner of Holistic Investment Planners (www.holisticinvestment.in) a firm that offers Financial Planning and Wealth Management. He can also be reached at ramalingam@holisticinvestment.in