Clean Up Your Finances

Key Points

  • Having your documents organized helps in case of emergencies, unforeseen deaths, and the mortgage process.

  • You can sort documents by the individual they concern, chronology, category, and frequency of usage. 

  • Consider buying some tools or storage to make organizing easier. 

Make your life easier by keeping your important documents organized. In doing so, you will put yourself in a better position to budget, invest, do your taxes, and even buy a house.

Why You Should Organize Your Documents:

There are many benefits to organizing your documents.

  1. Hassle of Getting a Replacement

    Documents and financial records are often hard to replace. They may require some form of identification, cost money to replace, and be inconvenient to obtain. By keeping things organized, you will avoid losing any important documents and spending any extra time at the DMV.

  2. Easy Access during Emergencies

    In case of any emergencies, having organized files will allow you to get in and out quickly. Instead of having to scramble to get all those pieces of paper together, you will know exactly where your important records are and avoid losing precious escape time.

  3. Finances after Death

    While none of us want to think about death, it’s also a fact that death requires a lot of paperwork. By having your documents in one place, you allow your loved ones to grieve without having the additional concern of finding your will, struggling to make ends meet, or guessing your funeral preferences.

  4. Easier Mortgage Process

    By keeping your documents together, you will be more prepared when it comes time to buy a house or refinance. As part of the mortgage process, you will need to prove your financial credibility. This requires submitting multiple documents. Depending on your financial situation, the type of documents needed may differ. By keeping your documents organized, you will have a much smoother and much less stressful mortgage process.

Paper Types to Organize

How to Organize Your Documents:

Now that we’ve  covered the reasons to keep an organized record, here are some different ways to organize your files:

  • By individual.
    You would have a different category for things that are for the whole family, for each individual, and for certain groups (i.e. parents or kids). For example, if your loan is under two people’s names, then you would put it into a category for both those people. In most cases, you would probably have a space for each individual, for the whole family, and for the guardians (i.e. the non-dependents).
  • By category.
    You can easily sort documents by type. Some possible categories are personal, medical, financial, and home documents. Other possible categories include legal documents, insurance records, car information, and certificates/ identification cards.
  • By chronological order.
    This is more for financial records. To do this you would need to make a tab for each year. This will help enormously with keeping your pay stubs, bank statements, and receipts in order. However, some documents such as birth certificates and passports may not be as intuitive to organize by date, and therefore should have their own filing system.
  • By how often something comes up.
    Organize your documents by how frequently they need to be renewed, used, or replaced. For instance, documents which are never replaced can go in the very back, while items that require more attention can go more towards the front. For example, some things that need to be dealt with more regularly are insurance, health records, taxes, visas, and bank statements. On the other hand, things like birth certificates and wills require little to no maintenance. Of course, everyone’s situation is different so organize your documents according to how often YOU need to address them.

What’s Junk and What’s Jewel?

It can be hard to distinguish which items are still necessary and which are useless. To prevent you from accidentally tossing out anything important, here is a basic breakdown of how often certain documents “expire”:

  • After 1-3 months, you can throw out any utility bills, sales receipts for small purchases that aren’t deductible, and ATM/deposit slips.
  • In 1 year, you can throw out any checkbook ledgers, paycheck stubs, monthly mortgage statements, and expired insurance records.
  • After 7 years, you can throw out any bank statements, tax forms and receipts for items deducted on your taxes, cancelled checks, disability paperwork, unemployment pay stubs, and medical bills/claims.
  • You should NEVER throw out deeds, annual tax records, medical records, wills, estate plans, living wills, and documentation of home repairs, etc. When it comes to these kinds of documents, it’s better to be safe than sorry.

The “Recipe” for Organized Documents:

When sorting documents, there are definitely some items that are good to have around. Here are some things you can invest in for help with organizing:

  • Shop Your Own Mortgage Mobile App ($0) – Use the DocWallet feature on our free mobile app to keep track of your records. Simply take a picture of each document, upload them to the DocWallet, and have instant access to them through your phone. We have a 256 bit encryption so your documents will be safe
  • Binders ($) – Store your documents in a convenient and mobile place. Have binders for each category or stay organized with some binder tabs. You can also buy binders of different sizes depending on your needs.
  • Sheet Protectors ($) – Whether you are storing your documents in a binder or filing cabinet, protect them by placing them inside clear sheet protectors. This prevents them from being damaged by water or use, and makes them easier to transport.
  • Life Organizers ($) – Life organizers offer more support if you’re unsure what documents you should keep and how long you need to keep them. They come with clear pockets that you can store different documents in. However, they are not as customizable. And, if they happen to not provide enough storage then you will need to look into getting some extra storage.
  • Safes ($ – $) – Protect your important documents by keeping them in a safe. When traveling, you can also make use of hotel safes.
  • Shredder ($ – $) – Keep your information safe by shredding things you don’t need.
  • Filing Cabinet ($) –  These offer more storage space and durability. However, they cost more and are less easy to transport.

For more information on what documents and financial records you’ll need to get a mortgage, read more here.

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