Year-End Financial Housecleaning

Sort out the old to make room for the new. Use our guide to help you get organized.

There’s something about the close of one year and the start of the next that inspires a person to undertake a bit of financial housecleaning. It clears out the old to make room for the new and lets you get a feel for what worked in the past -- and what was just taking up space in your filing cabinet. What’s more, getting organized can help you make more informed financial decisions and save you money by relieving your accountant from having to wade through unnecessary papers.

Digging through the piles
Contrary to what you may believe, it is not necessary to keep a record of every financial transaction in which you engage. If you are constantly filling up boxes with check stubs, credit card bills, restaurant receipts, bank statements and every other type of record of your financial life, it’s time to get things in order.

Lower yourself into the depths of your paper plunder and start to sort. Divide the mess into four categories: Trash (this will hopefully be the biggest beneficiary of the exercise), Keep for a Month, Keep for a Year and Save Indefinitely.

Then go to it.

Trash

• expired insurance policies
• outdated mutual fund annual reports
• records from vehicles you no longer own

Monthly purge fodder

• ATM receipts
• small-ticket-purchase receipts (unless you need them for income-tax-claiming purposes)
• receipts for non-returnable purchases (unless you need them for income-tax-claiming purposes)
• credit card receipts

Annual purge fodder

• bank, mortgage company and investment firm monthly statements
• credit card bills
• utility bills
• paycheck stubs
• Indefinite holds
• tax returns and supporting documents
• warranties and receipts for all major purchases
• your passport
• your will
• deeds for property
• birth and marriage certificates

Once you’ve determined what’s worth holding on to, you need to find a place to hold it. Designate one area of your home -- a desk drawer, an under-the-bed plastic case, a cardboard storage box -- “the heart” of your finances. Keep everything you need there, including stamps and return-address labels, so that any time you swoop in to tackle a financial matter, your resources are at your fingertips.

It’s also a good idea to set up a financial staging post. File all your to-be-paid bills, to-be-filed charitable-donation receipts and everything else you will get to (you promise!) as soon as you have a chance.

For specific documents, nominate an accordion file folder “the brains” of your financial operation. Label its sections with broad financial categories like: “house,” “kids,” “investments” and “automobile.” Drop the appropriate documents into the pockets.

When the dust settles
As you sort through your materials, it will probably become apparent what investments have worked for you and which have lurked under the radar screen since you last took the time to notice. Now’s a good opportunity to reassess your portfolio and ditch the non-performers.

As a result of this exercise, you may also become aware of whether you’re missing any important documents. If so, keep a running list of which items you need, and make securing them the first order of business once you surface from your organizational duties.