Top 10 tips for organising your financial paperwork

What financial paperwork you should keep and for how long and what is the best way to keep it organised? Financial planner Vince Scully answers these questions in this edited extract from his book, Live the Life You Want With the Money You Have.

Getting your paperwork straight is the “make your bed first thing in the morning” of personal finance. I remember my resistance to my mother’s constant nagging to make my bed as a teenager. At the time, it seemed like a pointless exercise, because I knew I would simply toss it again when I returned to slumber each evening.

As an adult, I can see the benefits in my own life – sorry Mum! But what really surprised me was the weight of evidence to support the benefits. Admiral William McRaven, a former Navy SEAL, explained why in a commencement speech he made to students at the University of Texas at Austin, saying, “If you make your bed every morning you will have accomplished the first task of the day. It will give you a small sense of pride and it will encourage you to do another task and another and another. By the end of the day, that one task completed will have turned into many tasks completed. Making your bed will also reinforce the fact that little things in life matter.”

So it is with keeping your paperwork straight. This simple task can relieve stress, make your life less complicated and even save you money.

Despite advances in technology, and a quick hurry-along from COVID-19, we still haven’t become the paperless society envisioned over 30 years ago. Rather, we seem to be drowning in paper. So, what is the best way to sort out your paperwork and bills? How do you know what is important and how long you should keep it?

The stress that clutter creates is avoidable, so my top tip to sort out your paper life is to develop a system. It doesn’t matter what the system is. It has to be your system but it is good if your partner knows where to find stuff too – you never know when they will have to do it without you.

Top 10 tips for organising your financial paperwork

A good system will follow these 10 tips:

1. Handle each piece of paper once.
2. Open your paper mail next to the recycling bin so you can get rid of what’s not important straight away. Shred anything with sensitive details.
3. Split the rest into four piles: ‘File’, ‘Read’, ‘Pay’ and ‘Do’. File anything in the ‘File’ pile immediately – it gets a lot harder as the pile grows bigger. Keep your ‘Read’ pile handy so you can deal with it when you get a spare moment.
4. Schedule payments electronically and set a reminder a few days before the due date. This will remind you to make sure there are enough funds in the account.
5. Schedule a time every year to cull what you don’t need.
6. Automate as much as possible.
7. Go paperless. You can get most of your bills and statements electronically. Sign up for this wherever possible, but remember to download and save them somewhere that gets backed up. Most providers retain them only for a short period. Set up a reminder in your calendar (or choose automatic direct debit) so you don’t overlook payment dates and face late fees.
8. Keep your address details up to date with all companies you deal with.
9. Keep an inventory of what you own and what you owe, and let someone know where it is. You never know when you might need them to do stuff if you can’t.
10. Dump it when it’s no longer needed. I have been an inveterate hoarder when it comes to paper. I discovered the cathartic effect of dumping when I needed to deal with the contents of our family home when it was sold following my divorce. Out went decades of credit card statements (I had kept every statement since I left university), utility bills, and bank and investment statements. The pile eventually filled several wheelie bins, but boy did I feel better.

What paperwork should you keep and for how long?

The trick with dumping paperwork is knowing what you need to keep and for how long. Here are my tips.

Job-related paperwork

Keep your job application, letter of offer, any arrangements as to how you will be paid and performance reviews for as long as you work for that organisation. Dump these when you’re one year into your next job. Keep payslips for the current year until you get your annual payment summary. Dump all but the last two monthly payslips (and always keep at least three on file).

Your finances

Keep bank and credit card statements for as long as you have physical room for them (and at least the period required for tax). Credit card statements are great support if you have an insurance claim for a burglary. Electronic statements make this much easier. Keep your application form, offer documents, the product disclosure statement or brochure, and any advice you received in relation to any financial product you buy (shares, super fund, investment or insurance). Dump these when the product has expired.

Your assets

Keep receipts for any major asset (your car, boat or anything of value), together with a photo and any proof of ownership. If the receipt is on thermal paper that is likely to fade, take a photo of the receipt with your phone or make a photocopy. Dump these when you no longer own the asset.

Your home

Keep a file on your purchase (agent’s flyer, purchase contract, settlement advice) and your loan (your loan application, advice from your broker, loan offer documents, your copy of the loan agreement and mortgage, and every loan statement). Keep these for the life of the loan.

Keep rates, water, electricity, gas and repair bills. If you ever rent out your home, these bills can help reduce your future capital gains tax (CGT). That’s because the costs of owning an asset (for which you aren’t able to claim a tax deduction, mostly because you incurred them when the asset wasn’t generating assessable income) will be added to your cost base for CGT purposes when working out how much of the sale price of the home is a taxable gain. Keep these for as long as you own your home.

Tax

According to the Australian Taxation Office (ATO), you must keep written evidence of expenses and other deductions for five years from when you lodge your tax return or if you have a dispute with the ATO, five years from when that dispute was resolved. This includes the return itself, any calculations you made to get to the numbers on the form and documents supporting those numbers, including your payment summary, bank statements, dividend and interest statements, share certificates (CHESS Statements) and contract notes, receipts or credit card statements for work-related expenses, your logbook for your car and receipts for expenses, warranties and user manuals (keep these together, and when you sell, replace or dump the item, do the same with the instructions and warranty), and passwords and usernames.

Passwords and usernames

One of the best ways to save sensitive information such as passwords and usernames is offline. Keep a dedicated notebook for this purpose, and list all your usernames and passwords. Share this with one person you trust – a person who might need them too. Keep this book or file in a safe place where you can access it easily. Alternatively, use a password manager such as LastPass, Dashlane or, if you are a little handier when it comes to IT matters, Bitwarden.

This is an edited extract from Live the Life You Want With the Money You Have (Major Street Publishing $32.99), republished with permission.

Cover image source: fizkes/Shutterstock.com

About Vince Scully

Vince Scully is the founder of Life Sherpa, an online financial advice service. He is a qualified accountant, financial planner and mortgage broker with more than 35 years of experience in banking, finance and financial planning. Vince is also the author of Live the Life You Want With the Money You Have (Major Street Publishing).