Are your investment accounts scattered? Do you have accounts at three different banks and four different brokerage firms? Or, do you have three different 401k accounts or IRAs from previous employers? People who are great savers often respond to offers to open accounts at different banks and brokerage firms. With accounts at different places, it is much harder to manage your finances.
If you have multiple accounts with a variety of banks and brokerage firms, consolidate them. It won’t be easy at first, but it will make your life simpler going forward.
First, 401ks from former employers and traditional IRAs can be merged into one account. Decide which brokerage firm you want to use. Typically, the brokerage firm will help you complete account applications and transfer forms. If you work with a financial adviser, that person will handle all of the paperwork for you.
Once you consolidate your bank accounts to one bank, set up many of your repetitive bills to be paid online. (First, consolidate your bank accounts to one bank). If this seems difficult, ask the customer service agent at your bank to show you how.
If clutter is a problem with receipts, bills, insurance statements, bank statements and investment statements, set up a filing system. Remember that clutter often results from items “not having a home,” so creating file folders for each category will help you keep your financial papers organized.
Many of my clients have chosen to not receive paper statements or documents through the mail. They prefer to receive everything via email. This can work well, but it requires that you set up “folders” on your computer for bank statements, investment statements, tax documents, etc.
I prefer statements on paper, but I ask the investment firm to bundle the monthly statements into one envelope each month. Instead of receiving one envelope for each account, you will receive one envelope. Put everything in that envelope in a file labeled “Investment Statements.” When the next month’s statements arrive, put those statements in the front of the file.
Trade confirmations are mailed separately and are filed in a separate file folder. Keep a tax file for the current year’s tax information, and file charitable receipts, tax documents from banks or brokerage firms, or medical expense statements in the folder as soon as they arrive. When you are ready to gather all of your tax information, everything is in one file.
If you keep your files for many years, you may feel as if you’re drowning in paper. My rule is to keep your actual tax returns forever. (These are the actual tax returns – not all of the supporting documents). Put them in a box or bin labeled “old tax returns.” I recommend that my clients keep the supporting documents for the returns (1099 statements, the year-end paycheck, charitable receipts, etc.) for seven years. Other information (bank statements, credit card receipts, utility bills) can be shredded after one year.
If you are one of those people who is afraid to destroy anything because you think you just might need it someday, put those files in a banker’s box or a bin labeled “archives” with the years listed (such as 2005-2010). These boxes can go in the garage or even under the bed. If you find that you don’t open the boxes during the next five years, you should feel more comfortable having the contents shredded. (Anything with your name, Social Security number, investment or bank account numbers, or other personal information, should be shredded before being discarded.)
Photo by: Takashi Toyooka
