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5 steps to organized finances

The start of a New Year is a good time to get your financial papers in order.

by Dory Devlin  |  4543 views  |  0 comments  |      Rate this now! 

Okay, so the holiday decorations are still up, you're dragging yourself back into the work swing after a tough end of the year, and you've had it up to here with all the advice on how to improve everything in your life at the start of a new year. I get it. But as you recover from holiday spending and tax documents arrive in the mail, this is a good time of year to get your finances organized. Since we're all inundated with new year must-do's, I'll keep it as simple as possible with these 5 steps to organized finances.

1.) Files are your friend. Keep a file of all incoming tax documents. Keep another to pull together all receipts and backup documents you'll need to file taxes. Spending some hours early in January finding all of the necessary pieces of paper will save many headaches and lost hours doing it at the 11th hour.

2.) Choose one system and track your money. It is not Quicken or bust anymore. There are so many great tools available today (more on them in a later post) to help you organize and track money matters that the challenge is merely finding the one that works best for you. Sites like Shoeboxed help you organize receipts and business cards online, while budgeting sites like Mint make it easy to track all of your accounts and spending in one place. But I can't tell you which one will work best for you. You need to spend some time with each tool to decide which you are most comfortable with -- and which you are more likely to actually use.

3.) Get rid of old bills, statements. While you're doing all of this organizing, it's a good time to clear the clutter of old, unneeded bills and documents. Most of us hold onto extra paper because we fear once we toss it, we'll need it. But here are some good guidelines:

  • Keep federal and state tax returns for 7 years, 10 if you're feeling extra conservative. In most cases, the IRS has three years to audit your returns, but has six years if the agency believes you have under-reported income by 25 percent or more.
  • Bank statements. Unless they contain tax-related info (deductible expenses, charitable donations), they can be discarded after you check them and the next month's statement arrives.
  • Pay stubs. Keep them until you get your year-end W2 statement. You may also want to hold onto the year's last stub, which includes a final earnings and deductions tally.
  • Credit card statements. Keep only if they include tax-related expenses and major home expenses that you'll want a record of later.
  • Mutual fund, stock statements. Keep records of stock sales and purchases for as long as you own the stock, plus six years. Keep mutual fund statements until you receive year-end statements; keep those and discard the monthly or quarterly statements.
  • Bills. Once you've paid them and verified they've been paid, toss. Or, better yet, shred. Invest in a shredder to feel more secure about getting rid of all this financial paper.

About the Author

Dory Devlin is the Work+Money editor on Yahoo! Shine. Check out Shine Work+Money here.

Read more by Dory Devlin

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