How to Be Your Own Superhero: Organizing your financial records

During this season of summer blockbuster movies, do you ever wish that you could fly into a daunting situation, save the day, solve the problem, be lauded as a hero, and fly off again with the crowd cheering?  How about doing this for yourself and your family on your very own financial adventure?  It’s not as insurmountable as it looks – just follow these 3 simple steps.  No cape required.

1. Fly in and assess the situation: “What should I keep? For how long?”

Financial records tend to pile up.  Keep them at bay by getting rid of the stuff that has outlived its usefulness.  For example, the IRS has guidelines on how long to keep documents related to your tax return.  That guidance can be found here: https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records

The general rule of thumb is 3 years for tax returns and 1-2 years for bills.  Keep property records/titles for as long as you own the property.  And keep forever unique items like marriage/birth/death certificates, social security cards, and your will/estate planning documents.  What about those investment account statements?  Keeping your year-end statements can be helpful in tracking progress over the years.  The in-between quarterly statements can be shred once you receive your year-end statement.

2. Break out the utility belt: “Where should I keep my records?”

There are two basic options depending on your preference for paper or digital filing.

If you keep paper files, a fireproof and waterproof safe is recommended.  Some professionals will recommend a safety deposit box, but that could present a challenge if you need to access your documents outside normal business hours.  Furthermore, if something should happen to you, it could be difficult for a caretaker or executor to get access to these important documents.  A home safe can be locked and reasonably protected from harm; it’s worth it to invest in a good one.

If you prefer to keep digital files, just be sure they’re easy for you to find and access.  Having financial records sitting “somewhere” in your inbox may not be the most effective way to store them.  Consider creating a digital folder, just like you would a paper folder, to store digital documents, statements, and invoices.  That allows you to quickly retrieve them as needed, rather than having to search through emails.

3. Keep the crowd cheering: Your “Master Plan” (for world domination)

In the words of Spiderman: “With great power comes great responsibility.” What if something were to happen to you? How would your Executor (spouse, children, or attorney) know where to find important information and documents?

One of the most important, valuable and loving things you can do is to keep a “Master Plan” somewhere that your loved ones can easily find in an emergency.  In this digital age, this “Master Plan” should include account logins and passwords.  It should also list contact information for any important financial institutions or professionals, such as your CPA and investment advisor.  Having this information at minimum will greatly help your heirs.  If you can’t keep up with a detailed description of your accounts, at least they will know where to go to find the information.

And there you have it.  Organizing your financial records doesn’t have to require superhuman strength or an army of legions.  It can be achieved in a few simple steps.  Just imagine your family cheering you on as you fly off into the sunset, sighing and saying, “My Hero!”