Every financial transaction, no matter how “small”, generates paperwork. The average working age adult can build up quite a bit of financial history in surprisingly little time. For anyone fresh out of college and adjusting to their first full-time job, the need for a financial filing system may not be viewed as a top priority. At the most, there might be only a few financial concerns which require attention such as auto insurance and loan payments, checking and saving accounts, credit card statements, expenditures for home furnishings, household bills and student loan obligations. Yet, the amount of paperwork and detailed financial history generated by those “few” concerns is truly staggering! And, this is only the beginning! We have not even counted other future financial assets which will likely be acquired over time by this young college graduate such as a 401(k), an IRA, a title to a home, various insurance policies and other investments. While shoeboxes and accordion files may be deemed sufficient, at least initially, for storing vital financial records, at some point, as one builds and accumulates a variety of assets, the need for a top-notch, streamlined financial filing system quickly becomes apparent.
How A Financial Filing System Can Help
• Information is easily accessible for quick reference. Having an efficient financial filing system saves time as you no longer have to hunt through mounds of paperwork for last month’s electric bill or a discontinued life insurance policy.
• As one builds ands accumulates a variety of financial assets which differ in levels of complexity and detail, keeping meticulous records for tax purposes is essential.
• Think of your filing system as a “financial garden.” Maintaining your financial garden in optimum condition requires considerable upkeep. Periodic weeding is necessary. Once you have your financial filing system in order, you can decide what you want to keep or discard. You may also find it helpful to create special files for discontinued or outdated financial records. Managing your finances more effectively becomes an infinitely easier task when you know exactly what you have.
• You can use your financial filing system to chart your progress in reaching specific personal goals. Most individuals naturally prefer to view their progress towards wealth-building by tallying up their net worth every few years or so. Investing, however, is only one aspect of personal finance. Spending is a key component. Reviewing the 2 to 4 year historical record of your bills can reveal some rather insightful details about your spending habits. For anyone who wants to strengthen their savings plan by changing their spending habits, a thorough analysis of their household and personal expenses over a 2 to 4 year time frame is a constructive first step.
Establishing A Filing System
When it comes to implementing an efficient financial filing system, there are only two considerations:
• It should suit your individual temperament and needs.
• It should be as inexpensive as possible.
A financial filing system can be as simple or elaborate as you want it to be. Some individuals may prefer to color-code their files while others may use only 2-inch or 3-inch binders to organize their financial records. While metal vertical or lateral filing cabinets add sophistication to any home office, they tend to cost more than ordinary file storage boxes work which work just as well. Regardless of the filing system you choose, the focus should be on organization rather than style. Convenience is a pivotal concern. Implement a filing system which does not take up a great deal of space and is simple to maintain.
At first, organizing your financial filing system will seem like an exhausting, frustrating and time-consuming chore! However, as you become accustomed to the workings of your unique financial filing system and begin to rely on it to manage your personal finances, you will find it to be an invaluable tool.