Organizing and Protecting Your Financial Documents

A great deal of personal finance is paperwork. You have pay stubs, bills, insurance papers, bank statements, tax records, loan documents, etc. There are several others that come into play in your financial life that aren’t, strictly speaking, financial documents such as birth certificates, death certificates, marriage certificates, and so on.

Fact is, loss of these documents can mean a great deal of hassle or outright disaster. It’s a major hassle if you’re applying for a mortgage, for example, and you can’t find your pay stubs or your tax returns. Lack of organization of these documents can delay closing on a homeĀ in this case. Theft of some of these documents could cost you hundreds or thousands of dollars, damage your credit and consume hours and hours of your time dealing with the fallout.

In addition to loss due to being disorganized or due to theft there are disasters to think about. Fires, earthquakes and flooding could destroy your home, and with it all of your personal records.

Some documents require a bit more security than others. To organize and secure your records, you’ll need a small locking file cabinet and either a fireproof safe or a safe deposit box at a bank. It also wouldn’t hurt to have a small amount of secure online document storage for a few key documents.

Locking File Cabinet

You need a locking file cabinet to store things like pay stubs, monthly bills, bank statements and canceled checks. You should create a file folder for each item. You should include a few minutes every week to file everything in its file. At the end of the year you move all of the folders into a banker box that you store somewhere convenient. Why the emphasis on locks? Well, it has to do with the old maxim “better safe than sorry.” Thieves, like most other criminals, look for easy targets. Locked cabinets and storage require more time and effort on their part and that itself is a deterrent.

Fireproof Safe or Safe Deposit Box

If your home is destroyed by fire, flood or earthquake your important financial records could be destroyed as well unless you protect them. There are a couple options here: fireproof safe or safe deposit box.

A bank safe deposit box is one. Because it’s not your home, its contents would not be affected by a fire or flood at your home. The two main disadvantages are cost and a bit of inconvenience. Banks charge annual fees for safe deposit boxes. To put anything into a safe deposit box or to retrieve something from it, you have to go to the bank during its regular business hours.

A fireproof safe can protect your valuable documents at your home. It’s more convenient than a safe deposit box because you can access it any time you want. The down side of this one is the cost of buying one. Depending on the size and type of safe you get they can be very expensive.

What should you put in your safe deposit box or fireproof safe? All of the following:

  • Financial Documents: Such as tax records, mortgage notes, lease notes, auto contracts, divorce agreements, child support agreements, military papers, etc.
  • Estate Documents: Such as wills, life insurance policies, stock certificates, bonds certificates, family trust papers, managed account portfolio statements, business agreements and other investments.
  • Family Documents: Such as Social Security cards, birth certificates, marriage certificates, nationalization records, citizenship papers, passports and copies of driver licenses.

You could take this all a step further and use both a fireproof safe and a safe deposit box. In that case put the originals in the safe and copies in the safe deposit box.

Make sure a loved one has the combination to the safe and/or knows where the safe deposit keys are located.

Secure Online Storage

First of all the key word there is secure. As in bank-type security. At least one major bank offers this kind of service for about $5 per month. You scan and upload whichever of the above documents you want to be able to access electronically. If anything should happen to your home (and therefore your original records) you would be able to access, download and print them from any computer with Internet access.

I recommend storing financial records for at least 5 years. How long you retain other documents depends somewhat on the document and the circumstances. For example, mortgage documents should be retained until you pay off the loan or sell the property.

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