Brake for Records
You are busy. You need to work to draw a paycheck. Then you need to prepare meals, get the car fixed, mow the yard, do the laundry, and buy groceries.
And busy repeats itself. While you need rest from all the above, entertainment can be distracting. Evenings seem short when you have your dinner and try to rest while watching TV during the week.
Then, the weekend comes and the catchup on house chores and outside activities both enthuse and exhaust you. More rest and relaxation are needed.
But when do you take care of your administrative duties, like paying bills, scheduling appointments, and reconciling your bank accounts and credit cards? Have you gone through the mail and emails to make sure you have not overlooked something important?
You are responsible for income tax, property taxes, real estate tax, health insurance claims, property insurance, auto insurance, bank balances, bill payments, and any outstanding use of credit. Are you tracking any of that?
Make sure you schedule time to brake for records and records keeping!
Records to Keep
You must not ignore records keeping.
Some records are more important than others. But you must make yourself aware of what to keep and for how long. If the need arises, you will be very glad you can locate your needed files quickly!
There are many sources for what records to keep and for how long. But I will offer the following list suggested by the Federal Trade Commission Consumer Advice:
- Keep for a Year (If you can access electronically, shred paper copies.)
- Bank statements
- Pay stubs
- Undisputed medical bills
- Credit card and utility bills
- Deposited checks
- Keep for at least Three Years
A. Income Tax Returns (I suggest five years in case of an audit)
B. Tax-related documents, like cancelled checks, receipts, W-2s, and 1099s.
C. Records related to selling a home.
- Keep While You Own
A. The title to your vehicle
B. The title or deed to your home
C. Documents related to mortgage or vehicle loans
D. Home improvement receipts
E. Rental agreements and warranty information for major appliances
- Keep Forever
A. Birth certificate or adoption papers
B. Social Security cards
C. Valid passports and citizenship or residency papers
D. Marriage licenses and divorce decrees
E. Military records
F. Will, living wills, trusts, powers of attorney, retirement and pension plans
G. Death certificates of family members
H. Vital health records (especially those that pre-date electronic health records)
Protect Yourself–Shred
Protecting your identity is serious business. There are millions of desperate, selfish, and evil people ready to borrow someone’s identity to steal with no concern for what you must do to restore your good name or credibility.
Be careful of what you toss into your trash. Even while being buried in the landfill bags are torn open and papers fly. I hope you did not have anything on those papers like account numbers or other key personal information!
Consider shredding the following (although burning is also good):
- ATM receipts
- Utility bills
- Insurance bills or claims
- Any bank account related documents
- Property tax receipts
- Real estate related documents
- Any medical bills or medical insurance explanation of benefits
This was a short list. Though the key thing to remember is to protect your identity!
Records and Tracking
This may sound childish but how will you know where you put things?
It takes a minute to label a file folder or an envelope. Will you take the time to label important things or allow hours to find them later?
Consolidation helps. Use a two-drawer filing cabinet for limited time retention needs. And review those files at least annually for expired files to be burned or shredded.
Use a fire protected file box for permanent files. And put the key in a place you will not forget. Get into that box at least annually, as well.
Other Reasons for Tracking and Recording
You keep records for legal reasons.
Your current welfare depends on you tracking your current personal business, your personal finances.
You are the CEO and CFO of your personal business. You manage your income and monitor your spending. Then, you have a monthly meeting to review the results. Was last month profitable? Did your current ratio (cash to debt) improve? Did your net worth (assets to liabilities) increase?
Yes, that is what happens in monthly corporate meetings. I know, I worked in accounting for many years.
Your little personal business has a growing need to make frequent assessments. How else will you make improvements to your personal finances?
Method Options
I often wrestle with what technology can help with tracking my financial activities in a way that can help me keep things under control.
Few of us can afford to pass that monetary tracking function off to an accountant, who can provide monthly statements.
And I have not forgotten how busy you are. But I feel obliged to offer suggestions for your improvement.
First, funnel most of your spending through a checking account with a debit card to use for most purchases. And monitor that account at least three times per week. After all, this is a cash account, not a credit card. Overdraft fees are as bad as credit card interest!
Second, limit credit cards to ACH payments and pay off the card balance every month. If you cannot pay in full, make sure you keep a list of your monthly interest charges to remind you of the importance of controlling your use of that card!
Third, if you can afford an online app for tracking or accounting software, that would make recaps easier. However, a spreadsheet in Excel or on paper will work, if you take the time to summarize your spending by category. The category identifications are up to you but be careful when “Miscelaneous” gets too high!
Measures and Markers
How will you know when you are successful? Let me offer some markers to measure.
In your monthly meetings, can you declare that you saved at least 20% of your net income?
Are you without debt? If not, have you recapped your debt, explaining the reasons for the debt and the interest rate? A monthly debt reduction would win praise from your family!
Do you have a retirement account set up with regular contributions? Are you making contributions to the legal limit?
Make the effort to watch these markers and then you can gain a vote of confidence at your annual board meeting!
Long-Term Plan
Your personal business should last until death do us part. So build a long-term plan.
Your main goal should be “Debt Free”!
Make plans to do that. Track your progress. Do not let binge watching keep you from being a success!
Ups and Downs and Transitions
There is busy wasting time and there is busy making progress. Which will you choose to do?
Replacing old habits with new habits is a transition that you must make with purpose. Give yourself a reason. Keep good records. Track your personal business. Find success with good decisions on good information!