We thought computers would create a paperless society, but with retail receipts, bank statements, check stubs and documents, it seems we have more paper than ever. I call these unmanaged piles of paper financial clutter. What begins as a single letter ends up as a disorganized avalanche waiting to happen. Towering stacks on your desk and jammed into drawers, the piles become so big and unwieldy, you don’t want to deal with them and become a paper hoarder, afraid to throw anything away. As a financial educator, I hear my clients ask, “What do I do with all these papers?”
Financial clutter is more costly than you may realize. You may ruin your credit when you forget to pay bills or become unable to borrow money from a bank because you can’t put your hands on documents needed for the dossier. Financial clutter robs you of time, energy, peace of mind and your health. It also prevents you from maximizing your full financial potential. Excessive late fees, overdraft charges, unpaid bills, duplicate spending, missed opportunities¬-not to mention lost cash and checks– directly affect your bottom line.
If you’re serious about reaching your financial goals this year, tackling financial clutter is essential and tax season is a good time to start.
Here are four ways to free yourself of financial clutter:
Start by going through the stacks of paper as quickly as possible, sorting them into four piles:
• What you own, such as automobiles, mortgages and insurance policies
• Who you owe. Think about your monthly bills, credit card statements and student loans
• What you have. Consider bank statements, investments, big-ticket item receipts, assets
• Other non-essential financial items, such as charitable giving receipts, membership dues and coupons
Toss, shred or recycle items you no longer need.
• Toss receipts after reconciling them with bank or credit card statements, and discard expired warranties and insurance contracts.
• Shred last year’s credit card statements and utility bills.
• Get rid of paycheck stubs once you have reconciled them with W-2 or 1099 forms.
• Double check with your tax accountant or attorney to discuss papers you are required to retain for your particular situation.
Create a file for each item so you can keep up with everything.
• Make a file for each creditor, bank account, investment, etc.
• Place monthly bills in a container, on top of your desk or in the top file cabinet drawer so they are visible and easily accessible.
• Put longer-term items such as insurance policies and warranties in the lower drawers of a file cabinet or in storage bins.
Create a regular routine to process paper. For example, a system to process mail is to think about it as steps to take. Open it, file it, toss it or process it.
• Open your mail every day or at least weekly.
• Immediately throw away or shred junk mail.
• Place follow-up items in a “To Do” folder.
• File bills in an accordion folder by the due date.
• File all other items in their appropriate folders.
• Place bills in their appropriate folders once they are paid.
• Pay your bills online, use apps to cut the flow of paper even more.
It may take some time to eliminate financial clutter, but remain diligent. If you need help, enlist a friend or hire a professional organizer. Getting organized is a giant step toward financial freedom.
Samirian Hill, a financial educator, is founder and president of BudgetWise Financial Solutions in Southfield.