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Show Me the Money Lesson 2 : Record-Keeping - What to Keep, What to Discard1
Adapted by Josephine Turner2This document is best viewed as a PDF. Click here to access the PDF.
Overview
Record keeping seems like an intimidating task, and yet there is nothing too time-consuming or difficult about keeping a finger on your financial pulse. Lesson 2 focuses on the benefits of setting up an efficient home filing system. It simplifies the record-keeping process by breaking it into three parts.The process begins with a survey to evaluate your need for a record-keeping system. Once you have completed the survey and established a need for a home filing system, the next step is to determine which documents to save. Most important documents can be broken into two general categories - property and financial. These categories are then further subdivided (with specific examples listed), making it easy to determine how to organize your important records.
Finally, the lesson focuses on creating a record-keeping system to suit your family's needs. It outlines three important decisions you will have to make in order to establish a customized filing system. The lesson wraps up with some tips for periodically revising and updating your filing system.
Record-keeping Survey
Before you begin this lesson, ask yourself the following questions:Yes No
___ ___ Do I have a record system?
___ ___ If yes, would it be easy for other members of my household to figure out my record system?
___ ___ Am I sure titles to property and possessions are held in the best way for all concerned?
___ ___ Do others in the family know where to turn for necessary information about the family assets and obligations?
___ ___ Do I keep a list of people who are important financial contacts, such as tax counselors, attorneys, bankers, brokers, insurance representatives, employers, creditors, and debtors?
___ ___ Can my important papers be replaced if there is a fire and my records are destroyed?
If you answered "No" to two or more of these questions, you may want to improve your record-keeping system or get one started.
Benefits of a Record/Filing System
Record keeping can help you:
If you have not been keeping many (or any) records, or if you have been indiscriminately saving papers for years, you may need to try to replace some important ones that are missing. When deciding whether to keep or discard documents, consider how likely you are to need that paper in the future.
- Keep a close tab on where the money goes; this can be especially beneficial in uncertain economic times;
- Manage daily family financial responsibilities;
- Provide evidence of a significant event, such as a birth, death, marriage, or divorce, or of an important transaction, such as the repayment of a loan;
- Simplify the claim process if loss occurs from fire, theft, flood, or other insured casualties;
- Organize your financial activities, such as budgeting and planning for savings and investing;
- Prove that you are entitled to services and benefits, such as repair of household equipment under warranty; and
- Organize information for preparing tax returns.
Important Records and Papers for Your Files
Regardless of the extent of your records, they will most likely fall into two general areas of documents: property and financial.Property
Personal. Keep copies of most personal records that have been recorded by either a government agency or the courts. These include birth, marriage, and death certificates; adoption papers; citizenship papers; marriage dissolution papers; and military service records.
Real Estate. Keep the following real estate records: deeds, title papers, mortgage documents, tax assessment notices, papers showing the price you paid for property and those showing the price when you sold. Also keep records of capital improvements to property including bills and receipts for the duration of ownership (or longer as needed for tax purposes).
Household Inventory. Such an inventory of your possessions will be vital in case you have to make homeowner's or tenant's insurance claims because of fire, theft, or some other casualty. An inventory also is helpful if you are preparing a net worth statement. Begin by photographing and listing the contents of each room, the basement, and the garage. Then list any other valuable items as well. Update the list at least once a year. Keep appraisals of especially valuable property, including art, furs, or jewelry.
Automobile, boat, and other titled property. Keep title papers as long as you own the property. Keep current tag receipts.
Financial
Home Accounts. Use a notebook to record income and expenses. This is an easy way to see at a glance what you earn and what you spend (computer programs, such as Money or Quicken, may help with accounting tasks).
Bank Accounts. Keep a list of each account, noting the financial institution, names of co-holders of the account, account numbers, type of account, and rate of interest (if any). Keep copies of the agreements you sign authorizing automatic deductions from your accounts. You should keep complete and up-to-date entries in your checkbook register for each check you write. The completed register should be filed with your checking account statements. Canceled checks are receipts that should be kept to show proof of payment for as long as you own the item or until your have loan papers marked "PAID." All canceled checks whether check or copy of check should be kept for at least one year. Canceled checks used as a basis for tax deduction need to be kept even longer (see "Tax Records" heading, below) and should be filed with supporting materials for tax records. You will also want to keep annual statements of interest earned on savings accounts as part of your tax records for those years.
Credit Accounts. Keep copies of your retail credit and installment loan contracts. These documents specify credit terms and may be required for tax purposes or to settle differences with the creditor. Also keep complete record of all debts that others owe you. List of credit card numbers, issuing companies, addresses, and telephone numbers should be kept for the duration of the account. You may use "Credit Card Safety" (FCS5209/FY378 ) for this.
Investments. Investments in stock certificates, bonds, and other securities that are lost, stolen, or destroyed can be time-consuming or difficult to replace. List all stocks, bonds, and mutual funds, noting serial numbers, purchase price, date of purchase, and name of person owning the certificate. Refer to this list frequently to remind you to collect interest when due or to cash in bonds on maturity. You should also keep ongoing records of dividend dates and payments, since you will need this information for tax purposes.
Tax Records. For income tax purposes you are required by law to keep records that will enable you to complete an accurate tax return. Needed are all receipts, canceled checks, vouchers, and other evidence to help you verify amounts claimed as deductions or credits. (Possible deductible expenses include medical bills, taxes, interest expense on home mortgages, contributions, and expenses related to employment.) Keep copies of income tax returns, checks, receipts, supporting evidence, and tax withholding statements for at least six (6) years. The Internal Revenue Service has three (3) years from the date your taxes were due or filed to audit your return. However, if you have under-reported your gross income by more than 25 percent, the IRS can audit your return anytime.
Insurance. Insurance policies you hold might include life, accident, health, hospitalization, homeowner's, personal liability, disability, and automobile. Your insurance policies and records are necessary to make claims, to evaluate your coverage periodically, and to help your heirs settle your estate. These documents are easily replaced by the company. However, you should keep information on file about each policy. Information to record includes name of insurance company and agent, type and amount of coverage, policy numbers, names of those insured and the beneficiaries, amount and due date of premiums, and a record of payments and claims.
Wills. Keep your will up-to-date. Usually the original, signed copy of your will is deposited with your attorney or the probate court in your county. You may want to have other copies on file. Keep a written record of where you have placed copies of your will to help you when you need to update or change it.
Organizing Papers and Records
Once you have decided which papers to keep, you will need to decide how to organize them. The best system for efficient record-keeping depends on the individual family. The following three decisions should be considered before setting up or improving your record-keeping system.1. Choose one place to keep your records. This "family finance center" might be as elaborate as a home office or as simple as a drawer in the kitchen. Other possibilities include a file cabinet in the family room, a cardboard box that fits under the bed, or even just an accordion folder. The important thing is to find a place where all the necessary financial documents can be stored. It is ideal if there is a place to work nearby.
2. Decide who will take major responsibility for record-keeping in your family. Encourage all family members, including older children, to learn how the filing system works. That way, other members of the family can find information if necessary. Some record-keeping tasks can be shared or delegated, but one person (with the skills and interest to handle the job) will want to take the leadership.
3. Develop a regular schedule for bookkeeping and resolve to stick to it. A routine will actually reduce the amount of time you spend on record-keeping tasks. Set up a regular time during the month to balance the checkbook, fill in the family income and expense records (written and/or computerized), and pay the bills. There are three places for personal and family records: 1) A home filing system, 2) a safe deposit box and 3) on your person (wallet).
1. Setting up a Home Filing System. A home filing system can be as individual as the person who sets up and uses the arrangement. Usually it helps to alphabetize by large categories, then to alphabetize by subtitles (see "Home Filing System" for suggested headings and subheadings). If subheadings have individual folders, information should be easy to file and to recover (see filing guide attached). You can also use this list as a guide to organizing your files and as a file index. Keep a copy of it in the front of your filing system.
2. Use a Safe Deposit Box. You will want to keep some records in a safe deposit box or a safe at home. As a rule, anything you can't replace, or that would be costly or troublesome to replace, should go in a safe deposit box. Here are some suggestions:
Adoption papers
Birth certificates
Bonds and stock certificates
IRA documents
Citizenship papers
Death certificates
Deeds, plats
Divorce decrees
Household inventory
Important contracts
List of records and important papers
Marriage certificates
Military papers, discharge, and disability papers
Passports
Social Security cards
Real estate papers, abstracts
Titles to automobiles and other property
Wills
3. File These Papers in Your Wallet
Auto insurance card
Charge cards and credit cards
Driver's license
Identification (name, address, whom to notify in case of an emergency, special health information)
Membership cards
Figuring Your Net Worth
Another form you will want as part of your records is a net worth statement. To determine your net worth, just add the value of all you own - your assets - and subtract the total of all you owe - debts. Worksheet 1, "Your Net Worth Statement," can help with this calculation.You will need this information to:
Worksheet 1 also provides extra columns to calculate your net worth in upcoming years. It is a good idea to review your overall financial situation annually. Here are some guidelines for calculating assets:
- Apply for a loan
- Plot your financial growth
- Make plans for the future
Here are some guidelines for calculating debt:
- Ask a real estate agent to conduct a market survey of your property. This determines the value of your home in today's market.
- Check a used car price guide to establish the value of your car.
- Estimate the value of household items conservatively. Anyone who has had a garage sale knows that even televisions and stereo equipment often don't bring what you think they are worth. Use the appraised value for antiques and art.
- Check the newspaper for market value of stocks and mutual funds.
- Know the cash surrender value of whole or straight life insurance policies.
- Obtain the cash value of retirement plans such as 401K, 403B, or Keogh.
- Establish the balance of your home mortgage loan. This amount may be on your monthly statement. If not, ask the lender for an amortization schedule of your mortgage.
- List the balance due on all charge accounts, credit cards, installment accounts, and loans.
- List all current bills such as what you owe the dentist, this month's water bill, telephone charges, etc.
- Subtract your total assets from your total debts and you will have determined your net worth.
Summary of Suggested Activities for Starting or Revising Record-keeping System
Even the best record-keeping system won't fill your needs forever. Changes in employment or your family's lifestyle will require some adjustments in your record-keeping requirements. At least once a year, plan to review and update your files. January or February might be the best time for a recordkeeping overhaul since you are already reviewing your financial picture to complete your tax returns. Here are suggested activities to start or revise record-keeping:Establish and organize the important papers you plan to keep.
Assemble and place appropriate records and papers in a safe deposit box.
Prepare or update your household inventory. There are numbers of publications that you can use for your household inventory or you can create your own.
Determine your net worth.
Home Filing System
When organizing a home filing system, the following list of headings and subheadings may be helpful:
Accounts and Records
Account Book
Automobile records
Childcare
Credit card information
Education information
Transcripts
Diplomas
Employment records and resumes
Equipment warranties and instructions
Health benefit information
Health records
Household inventory
Income tax records
Letter of last instructions, living will
Magazine subscriptions
Power of attorney
Property tax records
Real estate records
Social Security records
Wills (copies)
Addresses and Telephone Numbers
Home/business
Personal
Advisors
Doctors
Ministers
Lawyers
Bankers
Insurance Agents
Relative
Bills
Paid bill receipts
Unpaid bills
Correspondence
Home/business
Personal
Financial Accounts
Canceled checks and account statement, current year
Credit card list (with numbers to report lost or stolen cards)
Deposit slips
Installment agreements
Loan contracts
Safe deposit box, list of contents and key
Investments and Savings
Bank savings
Credit union
Mutual funds
Stocks and bonds
Insurance Papers
Automobile
Fire
Health and accident
Homeowner's package
Liability
Live
Property
Theft
Personal
Birthday dates
Christmas card list
Christmas gift list
Hobbies
Reading book lists
Organizations
Church
Civic
School
Reference Material
Budgeting
Childcare
Cleaning
Clothing
Crafts
Equipment
Foods and nutrition
Furniture
Gardening
Health and safety
Home furnishings
Landscaping
Laundry
Remodeling and repairTables
Worksheet 1
Your Net Worth Statement
Assets (What we own)
Year 2006
Year 2007
Year 2008
Cash
Cash on hand
Checking accounts
Savings accounts
Certificates of deposit
Investments
Government bonds & instruments
Mutual funds
Bonds: Corporate & municipals
Limited partnership programs
Individual Retirement Accounts (IRA)
Life insurance & annuities
Cash value, accumulated dividends
Annuities
Vested retirement fund benefits
Accrued pension or retirement benefit
Real Estate
Home (market value less mortgage)
Other real estate
Property
Household furnishings
Jewelry & furs
Art & antiques
Vehicle 1
Vehicle 2
Other valuables
Other
Loans receivable (owed you)
Total Family Assets
$
$
$
Worksheet 1 cont'd
Your Net Worth Statement
Liabilities (What we owe)
Year 2006
Year 2007
Year 2008
Unpaid bills
Charge accounts
Credit card accounts
Taxes, federal
Balances due on
Education loans
Installment contracts
Loans (from banks, savings & loans, credit unions, insurance policies)
Other:
Mortgages payable
On home
On property for rent
Total Family Liabilities
Summary
Net Worth of Family
$
$
$
Footnotes
1. This document is FCS5205, one of a series of the Department of Family, Youth and Community Sciences, Florida Cooperative Extension Service, IFAS, University of Florida. Publication: July, 2001. Reviewed: August 2005. Please visit the EDIS Web site at http://edis.ifas.ufl.edu. This material was adapted for use in Florida with permission of the University of Idaho Cooperative Extension System.2. Josephine Turner, Ph.D., CFP, professor, Family and Consumer Economics, Department of Family, Youth and Community Sciences, Cooperative Extension Service, IFAS, University of Florida, Gainesville, FL 32611.
The Institute of Food and Agricultural Sciences (IFAS) is an Equal Opportunity Institution authorized to provide research, educational information and other services only to individuals and institutions that function with non-discrimination with respect to race, creed, color, religion, age, disability, sex, sexual orientation, marital status, national origin, political opinions or affiliations. For more information on obtaining other extension publications, contact your county Cooperative Extension service.
U.S. Department of Agriculture, Cooperative Extension Service, University of Florida, IFAS, Florida A. & M. University Cooperative Extension Program, and Boards of County Commissioners Cooperating. Larry Arrington, Dean.
Copyright Information
This document is copyrighted by the University of Florida, Institute of Food and Agricultural Sciences (UF/IFAS) for the people of the State of Florida. UF/IFAS retains all rights under all conventions, but permits free reproduction by all agents and offices of the Cooperative Extension Service and the people of the State of Florida. Permission is granted to others to use these materials in part or in full for educational purposes, provided that full credit is given to the UF/IFAS, citing the publication, its source, and date of publication.