Organizing your financial documents can do more than help you stay on top of your day-to-day finances. It can also help protect your family in case of an emergency.
It’s normal to accumulate a significant amount of documentation—both physical and digital—over time. However, if you don’t have a system to store or organize these documents, you may misplace important information, throw out paperwork you need, or keep records longer than necessary. These steps can help you organize your finances.
Keep track of online accounts
Virtually every aspect of managing your day-to-day financial responsibilities, from paying your bills to dealing with your insurance, can be done online. While digital access is convenient, it’s a double-edged sword from a security perspective.
Different online service providers tend to have their own log-in requirements, meaning you may end up with multiple passwords across your accounts. There are two approaches that can help you keep everything in order.
1. List all of your accounts and login information in one place. It’s critical you store this document in a secure place, given the volume of sensitive information it will include. It’s equally important to share where you have stored this information, and how to access it, with a trusted third party.
2. Use an online password manager. These managers use encryption to safely store digital information, which can range from logins and passwords to credit card information. You are only responsible for one password—the one to access the manager. Online password managers can also help you share limited access to certain accounts—with family members or an assistant, for example—while protecting more sensitive logins.
Digital document storage
In addition to login details, it’s important to understand how digital accounts handle document storage. For instance, your bank account may offer digital versions of your statements going back 10 years but require you to visit a branch for any records older than that. These details vary by institution.
Keep in mind: Choosing to receive digital statements, or simply accessing important information via a client portal, provides an added layer of security—your bank isn’t sending personal and sensitive information to you in the mail.
If you can easily access files via your online accounts, you may be able to skip storing sensitive documents on your personal devices and simply access them via your service provider when necessary.
Of course, there are many benefits to keeping copies of important information on your personal computer or cloud. For instance, if you lose your passport while traveling, being able to access a photo of it on your smartphone could be a major timesaver. Consider keeping digital copies of the following:
– Driver’s license.
– Birth certificate.
– Social Security card.
– Passport.
– Marriage certificate(s) and/or divorce decrees.
– Titles and deeds.
– Insurance cards.
Keep in mind: You likely need original or certified copies of these documents for any official purpose; digital files are intended to help you access important information easily and protect you in case of an emergency.
Make sure that any device that contains sensitive information is password protected. You may be able to go a step further and encrypt or password protect the documents themselves. (This is a critical step if you plan to store your documents on the cloud.) With particularly sensitive information, consider storing protected documents on an external hard drive, which you store in a safe place.
Store physical documents safely
Keeping physical copies of important documents can offer the same “just-in-case” protection without worrying about cybersecurity. However, physical documents come with safety concerns of their own. The best place to store documents may depend on your personal circumstances and the sensitivity of the document itself.
Filing cabinet: If you’re just looking to get organized, and you want your documents easily accessible, a file cabinet with separate folders for various document types can be a great way to get organized. Choose a filing cabinet with a key for extra security.
Safe: For more security, opt for a lock box or safe. Safes come in all shapes and sizes, and you can find a model that fits your preference in terms of passcode, lock, combination, and so on. If you plan to keep important documents in a high-traffic area, this can be a helpful layer of additional security.
Tip: Whether you choose a filing cabinet or a safe, opt for the fire-proof version.
Safety deposit box: A bank safety deposit box can add one final level of security, as you’re adding third-party protections to the mix. Keep in mind, however, that only authorized users can access the contents and only during bank hours. Additionally, safety deposit boxes tend to be limited in size and often come with an annual fee.
Don’t forget to purge
If you aren’t sure how to organize your files within your preferred storage location, consider sorting your papers by document type, then by account, and finally by year. In other words, you might use Banking > Savings account A > 2024 where you file your monthly statements. Or you might have Medical > HSA > 2024 where you file receipts and plan documents.
Regardless of how you organize your documents, the key to staying on top of things and avoiding clutter may be purging documents, not saving them. If you have digital access to savings account A, for example, you may want to skip monthly statements and simply have one folder with annual statements.
Seven years is a good guideline to follow for most important documents. The IRS has different requirements for how long you may need to keep various documents in case of an audit, but none extend beyond seven years. When in doubt, consult with a tax professional.
At least once a year, spend a few days reviewing your recently accumulated financial documents (both physical and digital) and discard anything older than seven years. Be sure to shred any documents that contain sensitive information. (Note: Depending on where you live, shredded paper may not be recyclable.)
On the digital side of things, be sure to regularly empty your recycling or trash folder to fully remove deleted files.
How your advisor can help
A team of trusted advisors can help you stay organized in numerous ways:
– You might share a list of accounts and passwords with your attorney for safe keeping. The attorney could then share the information with relevant parties if you are somehow incapacitated.
– Talk to your tax accountant about which documents to keep and for how long.
– Your financial advisor may be able to help with digital document storage.
At Quorum, for example, we ask clients to share important documents via the Quorum Client Portal, which doubles as secure document storage. Our portal encrypts your during upload and download, as well as on the cloud, using AES 256-bit standard encryption. This helps us access the information we need to build a holistic financial plan while simultaneously helping you stay organized. We can also help you figure out which documents to keep and which to delete.
If you have questions about organizing your financial and personal documents, contact us to discuss.
