So far, we have committed to change and assessed our financial situations. I know you may be anxious to get started, but it is hard to get motivated when you are knee-deep in paperwork. Getting your financial house organized is a great way to begin on your path toward financial wellness. But before you bulldoze that pile, you should know that some things are worth hanging on to. The key is to know what keep and what to toss.
- Grocery receipts and other nondeductible expense receipts and statements can be destroyed after they have been recorded for budgeting purposes.
- Paycheck stubs should be checked against your W-2. If it’s a match, you can toss them. If not, request a revised W-2, called a W-2c.
- canceled checks should generally be saved for three years. Keep those related to your taxes and business expenses permanently.
- Utility bill stubs may be destroyed after recording, however, you may wish to hold onto these for a year to compare monthly costs.
- Household documents pertaining to buying, selling or improving your home should be kept as long as you own the home.
- Receipts from major purchases should be kept as long as you have the item.
- Credit card receipts can be destroyed once you have reconciled with your monthly statement. Additionally, credit card monthly statements can be destroyed on an annual basis.
- Individual tax return documents should be kept for seven years, according to the Internal Revenue Service (IRS). The IRS has three years from your filing date to audit your return if it suspects good faith errors. However, the IRS has six years to challenge your return if it thinks you underreported your gross income by 25 percent or more.
Years ago, my financial life was a disaster. My bills were behind and I was living poor check to poor check, trying to keep up appearances. I thought as long as I could keep up the farce, I would be able to dig my way out of the debt abyss I created. Needless to say, that wasn’t true. I suffered tremendously from my secret.
Even though I was not consciously aware of it, my financial mess was always on my mind. I would run numbers in my head regularly. As the financial clutter grew, my life and options became smaller and smaller. Picture an upside triangle with financial burdens, debt, and out-of-control expenses on the top. As you move down the triangle, you and your relationships become more and more stressed, your health and well-being is compromised, and you end at the bottom with Financial, Emotional, and Spiritual Depletion.
Over time I was able to reverse my financial situation and in the process, I decided I wanted to help others do the same. For a few years, I worked one-on-one with friends and family to help them bring clarity to their financial lives. As a result, I eventually started this blog.
Many of my clients were overwhelmed with financial clutter. Their bills would be scattered around the house: some would be in a kitchen drawer, others might be piled on a table, while still more were in the car or a handbag.
Their method of bill-paying was to wait until their utilities were turned off. Then they would frantically find the quickest way to pay so they could get their telephone or utilities turned back on. Other bills would be ignored until the telephone calls from creditors started. Many of my clients admitted they live among constant clutter, with financial clutter just a part of it.
There is a way to turn financial clutter into clarity, and I’d like to share it with you. Here are the steps:
1. Track all your money. This will get you conscious and connected to your spending and earning behaviors. Use a checkbook register for keeping track of all spending that flows through your bank account, use another one for tracking cash, and keep a third one for any credit card purchases. I can’t tell you how powerful this is.
You have heard many times that you should write your spending down for a week or thirty days. But my experience is that most people who have money problems need to do this for a much longer time.
I have been writing down every penny I spend for the past twenty years! It has become a habit just like brushing my teeth. I love the way it keeps me grounded in my money behaviors.
2. Plan, plan, plan. I like using the term “spending plan,” rather than “budget.” Planning my spending and earning has changed my life forever. I strongly suggest you do a plan every month because each month is different.
Then, as you plan monthly you’ll have the data you need to create an annual spending plan, so you can see the big picture. If you plan at the beginning of each month, you will know if your plan will work. If, after adding expenses and subtracting expenses from your income, you see it will not work, you’ll need to make adjustments.
Tip: Always be mindful of your needs before your wants. We can never get enough of what we don’t need. Neglecting needs or “making do without” will lead to deprivation – which is the opposite of fulfillment.
3. Stay connected to your plan. If you deviate from your plan, it is usually for one of three reasons: you didn’t plan enough, something came up you couldn’t have planned for, or you bought something impulsively. When this happens you will need to continue adjusting your plan throughout the month.
Get help! Whether these steps sound too simple or too overwhelming, don’t be afraid to reach out to a professional money coach who can hold your hand through the process. If you could do it on your own, you would not be where you are.
Starting the process of Tracking and Planning is the beginning of coming out of the clutter and financial fog. You deserve to have a life of clarity, which will lead to a balanced, meaningful life of joy and fulfillment.
Finally, before taking out the trash, be sure that all identifying information has been destroyed to avoid your personal information falling into the wrong hands.