Set Up Your Command Center
If you have online access and a laptop, you can theoretically manage your financial life wherever you want. That’s especially true if you’ve ditched paper bills and statements in favor of their emailed counterparts.
Most people, though, are going to want a designated space in their house to process bills, file paperwork, and run their economic ship. The obvious place to create your command center is next to the computer you use to pay bills. If your computer isn’t in a good spot, with Internet access and a printer, move it to a place that can accommodate that and the other stuff you’re going to need, such as these things.
Office supplies—These include a stapler, paper clips, folders, paper (for writing complaint letters—sometimes you need an actual paper trail), envelopes, pens, stamps, Post-Its, and your checkbook. (We hope you’ll soon become like some of my MSN readers, who haven’t written a check in years, but until you’re entirely comfortable with electronic payments, you may want to keep the paper checks handy.)
Tickle file—Your bill calendar and alerts should prevent a bill from falling through the cracks. But if you’re new to electronic payments, or you’re still in the habit of being “triggered” to pay bills by the sight of such a bill, you may want to use a tickle file as a back-up reminder. (A tickle file “tickles” your memory about stuff you need to do.) You can use a folder or an accordion file; just make sure you use it only for bills, that it’s kept separate from other paperwork you need to process, and that you consult it frequently (more about that later).
Storage—Although some people work happily out of a banker’s box (those cardboard storage boxes you get at office supply stores), I find it a lot more convenient to have a two-drawer filing cabinet nearby. You may need less space—just a single drawer—if your finances are very simple, if you don’t own a business, or if you’re in the habit of scanning most of your paperwork and destroying or archiving the originals.
A shredder—As long as you’ve got paperwork with private personal information—Social Security numbers, account numbers, and so on—you’ll need some way to dispose of it safely. Although you can get a basic shredder for as little as $20, you should invest in a more robust crosscut version that shreds more thoroughly and that can dispose of CDs.
A filing system—Although some people are comfortable using a chronological system—filing everything by month, and trusting their memories to recall when something was filed so they can retrieve it—most people will find that an alphabetical system is more intuitive.
You can divide it any way you like, but some common divisions might include
- Bank accounts
- Credit cards
- Retirement accounts
- Wills and estate plans
You can divide the major headings from there. You’ll probably want, for example, separate folders for different kinds of insurance: auto, disability, health, home, life, and personal liability (also known as umbrella coverage).
If you want a terrific ready-made system, let me put in a pitch here for HomeFile, a terrific organizing system created by two financial planners. Not only does it help you make sense of your paperwork, but it also tells you when to discard or archive what. You can find it at the Container Store or at www.homefile.net.
You’ll also need some sort of system for handling receipts. Although your transactions will be increasingly handled electronically, you’ll still need to track some dead-tree product now and then—for rebates, returns, business expense reimbursements, and the like.
Here’s how I do it, using suggestions from Debbie Stanley’s excellent book, Organize Your Personal Finances in No Time.
Every receipt I get goes into one of three pockets in my wallet, depending on its type:
Long-term—Receipts I need to hold onto for tax purposes or to document big purchases
Action—Receipts I need to submit for business expense reimbursements or rebate offers
Short-term—Receipts I probably will never need again but that I want to keep handy for a few months just in case
Most of my receipts are of the short-term variety, and trying to sort and track them individually is too much of a pain. So I took three folders and labeled them “This Month,” “Last Month,” and “Two Months Ago.” Every few days, I dump a wad of short-term receipts from my wallet to the “This Month” file. At the end of the month, I transfer those receipts to the “Last Month” file. Next month, I’ll transfer this batch of receipts to the “Two Months Ago” file. At the end of the third month, I dump the contents of the “Two Months Ago” file in the trash.
I deal with the other receipts in my wallet every week or so—taking action on those that require it and filing the ones I need long term.
This system has served me well. I no longer have to face a mound of unsorted paperwork or a wallet that won’t close because it’s so jammed with paper. The only things I have to remember are making sure I put every receipt into my wallet (instead of letting the salesperson slip them into the bag, or stuffing them in a pocket) and emptying my wallet into the proper folders every few days.