SYSTEM FOR PERSONAL FINANCIAL RECORDS
Experts once predicted that computers would result in fewer paper documents. How wrong they were' Today computers are generating more paperwork than ever. Much of that paperwork relates to financial matters. Invoices. credit card statements. insurance policies, and tax records are the basis of financial recordkeeping and personal economic choices.
An organized system of financial records provides a basis for
- Handling daily business affairs. including payment of bills on time .
- Planning and measuring financial progress.
- Completing required tax reports.
- Making effective investment decisions.
- Deterrillning available resources for current and future buying.
Most financial records are kept in one of three places: a home file. a safe deposit box, or a home computer. A home file should be used to keep records for current needs and documents with limited value. Your home file may be a series of folders. a cabinet with several drawers, or even a cardboard box. Whatever method you use, it is most important that your home file be organized to allow quick access to required documents and information.
Important financial records and valuable articles should be kept in a location that provides better security than a home file, A safe deposit box is a private storage area at financial institution with maximum security for valuables and difficult-to-replace uments, Access to the contents of a safe deposit box requires two keys. One key is ued to you; the other is kept by the financial institution where the safe deposit box is ated. Items conml0nly kept in a safe deposit box include stock certificates, cono a list of insurance policies, and valuables such as rare coins and stamps.
The number of financial records and documents may seem overwhelming; however, they can easily be organized into 10 categorie. These groups correspond to the major topics co\'ered in this book. You may not need to use all of these records and documents at present. As your financial situation changes. you wil add others.
How long should you keep personal finance records? The answer to this question differs for various documents. Records such as birth certificates. wills. and Social Security data should be kept permanently. Records on property and investments should be kept as long as you own these items. Federal tax laws dictate the length of time you should keep tax-related information. Copies of tax returns and supponing data should be saved for six years. Normally. an audit will go back only three years: however. under certain circumstances, the Internal Revenue Service may request information from six year back. Financial experts recommend keeping documents related to the purchase and sale of real estate indefinitely.
