How to Organize and Secure Your Financial Documents
- November 4, 2019
- by Ashley
Organizing your finances is a great way to help you save time and money as well as offer peace of mind. Here are five steps to get you started, including ways to keep your financial data digitally and physically secure.
In the process of getting organized you will probably discover areas that you can save some money (like cancelling an unused subscription, refinancing a loan, or getting a better deal on insurance).
Getting organized financially is also a nice thing to do for your loved ones. When you pass away having your financial documents organized reduces the strain put on them.
Sorting through countless pieces of mail to find just one financial document is extremely frustrating. It can feel like trying to find a needle in a haystack. If you are tired of wasting your time rummaging through your paperwork every time you need a piece of information, it’s time to organize your financial documents.
1) Review the Documents You Have
Before you can get started organizing, you’ll need to know exactly what financial documents you have. You never know what documents may need immediate attention or can be filed away. Looking through your files will help you discover things you may have missed that could save you money. Many people discover bills that are overdue to errors that occur that have gone unnoticed.
While you’re sorting your paperwork, you should divide them into different categories. This will help with creating a new filing system. Here are some categories to think about:
What to Include
Car titles and documentation
Put your new bank statements in this file once they have been reconciled
File bills you have paid with the date the payment was sent
Employment agreements, business registration, rental agreements, divorce papers
Statements, your credit report, misc benefits and warranties through your credit cards
Diplomas, transcripts, certificates, enrollment records
Employment documentation and employee handbooks
List of names, addresses, phone numbers, and important people that help you with your financial matters
Medical records, copies of insurance cards, receipts, any other insurance information
Any insurance policy you have such as home, auto, or life
Retirement plans, IRA accounts, brokerage accounts, other investments, or stock holdings
Personal, student, or auto loans
Items to read
Important financial documents you should read at a later time
W-2, 1099s, deductions, and keep at least three previous years of tax documents organized by year
Cable, water, phone, gas, and other bills
Wills, trusts, and estate planning dos
List of beneficiaries and all current estate planning documentations
As you are going be sure to organize your documents in chronological order within each category.
2) Write Down All of Your Accounts
Once you have reviewed your financial documents, make a list of all of your accounts. You will want to include all of the basic information for each account on this document. This should include passwords and usernames. For debt-related accounts you will also want to include APRs, lenders, and other important information you may need.
Additionally, this is a great time to review your beneficiaries on your accounts, update contact information, or spot any errors that may have gone unnoticed.
If you are concerned about leaving behind an organized set of information for your loved ones when you pass away, see our In Case of Death Template.
Wait a second… this is pretty sensitive information! You don’t want it laying around in the open or sitting on a computer that could be stolen. See the next section...
3) Set Up a Secure Filing System
After you have divided your files into categories and recorded all of your accounts, now you can lock it down. The goal is to have all this newly organized financial information accessible to you, your loved ones (if needed), but no one else.
There are two main categories of documents: paper documents and digital documents.
Even in the 21st century some of our most important documents are still in physical form. These include:
- Birth Certificate
- Social Security Card
- Power of Attorney
- House Title
- Car Title
So at a minimum you’ll need a secure place to store these critical documents. A small fireproof lock box is a good start, but depending on how much you want to store you may need to look into a fireproof floor safe. Bolting it down so it can’t be easily carried off is a good precaution.
Locating your filing system comes with tradeoffs. The basement is a good candidate, but you don’t want to expose these sensitive documents to a flood hazard. Putting it in the attic keeps it away from prying eyes, but makes it a pain access. You may want to consider storing it in your office closet or close to your main living area. Making it easy to access will encourage you to stay more organized throughout the year. The most secure location would be a safety deposit box at your bank.
Just like your physical lock box, you need a digital lock box to keep your sensitive financial records. My recommendation is to get a computer (ideally a small laptop) that is dedicated to your financial life. Store it in a locked cabinet or your safe and make sure the data is encrypted (which I’ll discuss below). Install a good antivirus program on it. Then, only use that machine for financial purposes. That way the chances of you getting hacked are much less.
In terms of staying organized, create a folder for each year, with sub folders for categories to keep it clean. Give files descriptive names so if you need to search you can find it.
One gadget that really helps with digital filing is a multifunction printer scanner with an automatic document feeder. These run as low as $150 and they really help to stay organized. Every month you will get new pieces of paper, letters, receipts, statements, etc. They can all be scanned in, and once backed up, the paper versions can be shredded. Step 4 of our five ways to protect yourself from identity theft is to shred junk mail. I also advocate for shredding sensitive financial documents after being scanned in. Of course if you think something is important keep it and don't shred important documents like your birth certificate!
Personally I opt to get my financial statements in digital format. I regularly download them and save them in my financial computer. That way I never get a paper statement mailed to me (which prevents identity thieves from getting to me by stealing my mail).
As for your master list of accounts, in Excel you can set a password set under File -> Info, Protect Workbook. This isn’t true encryption. In fact it can be cracked by hackers who have access to the file. So take care not to email this document. Think of the password as a deterrent only.
The ultimate solution is to encrypt your entire computer using a technique called “full disk encryption”. Without encryption enabled, anybody with physical access to your computer has all your data. Having a technician set it up for you is well worth the peace of mind.
- MacOS has this built in with a utility called FileVault. It can be activated under System Preferences -> Security & Privacy -> Turn on FileVault.
- Windows - there are many options for disk encryption on Windows, some bundle with antivirus, others are open source. A Microsoft encryption utility called BitLocker is available in Windows 10 Pro and Enterprise.
- Linux - some Linux flavors support full drive encryption. If you are using Linux you are already probably pretty tech savvy, but it may require doing a fresh install.
In terms of digital security this barely scratches the surface, see our post on the basics of digital security for more ideas.
4) Use a Financial App or Website to Better Manage Your Finances
The more organized you are, the better grasp you’ll have on managing your finances. If you don’t understand all the pieces involved, it can be a challenge to comprehend where you stand and what direction you need to go. Enlisting the help of a financial tool such as Wealth Meta, can help you get a better handle on the scope of your financials.
With tools like Wealth Meta you can set goals, create a budget, monitor your spending habits, and calculate the correct savings rate to reach your version of financial success. Managing your finances alone, is a cumbersome and confusing task. Enlisting the help of a financial tools can help you reach your financial goals with ease.
5) Review Your Financial Statements Regularly
Now that you have organized your finances, it’s important to review your documents regularly. A good way to remember this is to set an alert on your phone or calendar to remind you to do this once a month.
It is easy to receive bills or statements and simply file them away without actually reviewing them. Taking time to review your documents will help you monitor your progress toward your goals and help you spot future errors that may cost you money.
Many people choose to manage their finances in a reactionary way (when something goes wrong). This is a big financial mistake that can cost you and your family financial security. Actively managing your finances will help you rest easy knowing that you’re not leaving your financial future up to chance.