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Organize Your Money in 4 Simple Steps

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by Jean Chatzky ,AARP Magazine

Well-Being
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We all know we can find satisfaction and reduce stress by decluttering and reorganizing our homes. But that goes for our finances, too.

When you're organized, "the world around you is supporting you, not fighting you," says Regina Leeds, coauthor of One Year to an Organized Financial Life. Having spent quality time with my shredder lately, I must say I agree. So here's a quick guide to tidying up.

Use the same system on both desktops.

One factor that makes your financial life complicated is that it runs on two tracks: paper and electronic. If you're like me, you receive bills in the mail but pay them electronically. Or maybe you receive some brokerage statements via email, others via snail mail. The key to keeping this organized is to have filing systems that mirror each other, Leeds says. "Give the folder on your computer the same name as the one in your filing cabinet."

Know what to keep and what to toss.

"Organizing isn't just purging; it's knowing what to save," says Barbara Weltman, an attorney and the author of several J. K. Lasser tax guides. Two general rules: Anything tax related gets saved at least three years. Anything tax related that reflects a loss, for seven. Insurance policies? Get rid of the old versions when new ones arrive. Keep receipts for transactions until you get the monthly bank and credit card statements that reflect them. Then keep the monthly statements until you get the year-end reconciliation. For guidelines on what to keep, check out IRS Publication 17, at irs.gov; learn more about how to protect your information at AARP's Fraud Watch Network

Organizing isn’t just purging; it’s knowing what to save.

Have a day-to-day routine.

Once you have your system down, staying organized is a matter of upkeep. Put all incoming bills in the same spot (or spots, if you receive bills both online and by mail) daily, Weltman says. Mark the due date on the calendar; then, after you pay the bill, write "Paid" on it and file it.

Gather your tax documents year-round.

Grab a three-ring binder with pockets, says Weltman, and use it to house all the tax material you get during the year, such as 1099s, acknowledgments of charitable contributions and proof of estimated taxes. For electronic records, she suggests printing them out and putting them into the binder. The payoff: When you meet with your accountant or tax preparer (or sit down with TurboTax) in 2017, you'll have everything at your fingertips.

Want more advice? Jean Chatzky talks dollars and sense at aarp.org/jeanchatzky.