How To Organise Your Financial Documents?

Organizing financial documents is most important action item when it comes to the financial planning. If you have organized all the documents, it is easy for the future reference. It becomes more complicated every year due to the new investments and other growing aspect of your financial life. Take an example, you have worked on a company for 10 years, do you have all the documents for the past 10 years?. The documents could be of different type, here organizing means keeping it well structured and easy to search in the future. Nowadays, most of the documents are only the digital copy, if you are not keeping it in the safest place, it will be destroyed when your PCs hard disk crashes. This article explores the few tricks to keep your documents well organized and maintain without much hassle.

Income Related Documents

Any documents related to income or earnings are categorized under the income related documents. The following are the list of documents fall under this category:

Income Tax Returns: This is one of the most important document as a proof for the tax payment. Every year tax payer has to be file IT returns at the end of the financial year and get the acknowledgement from the income tax department. This document has to be stored carefully for the future use. Note that, you have to maintain this document forever, you may require this document even after 10 years of time. The following are the scenarios when this document will be required.

  • If you get a notice from the income tax department about the possible mismatch on the tax payment and asking for the pending payment. You might require to check with your IT returns if the demand is correct or not.
  • This is a valid proof for your income. Thus most of the banks ask this document for approving the loans. When they ask, they would ask you to submit the past 5 years or 10 years document based on the nature of loan applicant is applied for.

Form 16:

This document is issued by the companies to their employees. It is a proof for the tax deduction on salaries paid to them. Form 16 is issued after the completion of the financial year. This document contains the details of tax paid by your company to the IT department. Also it shows the date when it is submitted to the IT department. It is not most important one to maintain for long time, since this document is helping you to file the IT returns. So, IT returns would be the most important the form 16. However, it is good if you keep records for the future purposes. The following are the few cases where you may need this document.

  • At the time of applying for the loans, in cases when you have lost the IT returns document, form 16 will be used for showing the proof of your income.
  • For Any purpose where you have to submit the proof for your yearly income. In most cases, preferred document would be IT returns.

Expenses Related Documents

This depends on your habits of maintain the daily expenses for your households. Few write their daily expenses for the records and many don’t keep the records of the expenses. Do you have monthly budget plan for your house?. This is not very common practice, but if you have sufficient time then it is good to maintain a budget and track it effectively if you can follow your budget plan. The following are the list of expenses you may have to keep it for the future reference.

Budget / Expenses Sheet:

This section not very important. Most of us not maintaining the record of our daily expenses. If you have a plan, then keep these documents safely for next 3-5 years to compare with the present situation of the expenses. It will help you to plan for the future.

Purchase of Jewellery:

It is good idea i you could have the copy of records for the jewellery you have purchased. This may not be important if you buy in less quantity, for the bulk purchase, it is better to keep the records with you.

Bills & Receipts:

If you have purchased goods with guarantee / warrant, it is neceaary to retain the bills and receipts for that products. Apart from that, you would buy Annual Maintenance Contract (AMC) for some of the home appliances which has to be renewed every year. You have to maintain all the documents in easily accessible location.

Documents Related to Loans

The following are few documents which needs to be kept safe for the future reference.

  1. Loan sanction letter from the bank
  2. Loan amortization schedule from the bank (not all the banks providing this certificate)
  3. Loan closure letter after you have repaid all the pending amount. Once you have closed all the pending payments, get the signed copy of letter from the bank for your reference. This is most important and have to keep this document safely. In case if you have problem in getting the property’s original document from the bank or bank has lost the original document, this loan repayment certificate will be useful.

What ever the type of loans, the above documents are common. Apart from the above references, you may have some other digital copy or documents sent from the bank. Keep all the documents in safer location.

Investments / Assets

This is the most important and broad category to maintain. We can list down the following important items under this category:

Bank Statements: Nowadays mos of us doing the transaction online. Also banks send the periodic statement through post if customers are interested. Every year take the complete transactions copy. This details will be useful at the time of doing the income tax returns filing. Not only the bank statements, anything related like cheque books, application form, etc. can be stored along with other documents.

Insurance Policy: Keep the original copy of all the policies of your family in the same location. At the time of maturity, if policy holder don’t have the original policy, they will have some trouble on claiming the policy amount. If you have health insurance, then you have to renew the policy every year.

  • Keep all the original policy documents
  • Inform your family member about the policy details and where you have stored the files.
  • Health insurance policy copy would be useful for the renewal.
  • Auto insurance copy also have to be keep in safe till the renewal date.

Property (Land): When you buy a new property whether it is land or house, there is list of documents to be verified before buying a property. Every buyer would seek for the valid documents. So, it becomes more important for the property owner to have all the original documents in place before making any agreements. You may purchase more than one land, you will have to keep those documents safely and share the details with the family members.

How to Safekeeping e-Documents ?

The above sections are only talking about the different types of documents and its use. In the modern world, most of the documents are in the digital format. Even if you take income tax returns filing, govt. has made e-filing is mandatory. It becomes more number of digital copies in your mail boxes which needs to be organized effectively, otherwise it will be easily lost with the other documents. The following are some of the tricks which would help you in back up the digital documents and store it safely.

  • Use online backup tools for storing the digital documents. Since these services offer free schemes which is sufficient to store the important documents, good idea to have multiple accounts.
  • Use hard drive and doing the periodic backup and keep it in the safe location.
  • Have multiple backups to avoid any damage for the backup hardware.
  • Create different folders and store it in meaningful way to avoid any confusion in the future.

Final Words…

I hope this article provided some basic details on storing the documents and importance of that. It would learn many things only when you start the implementation of organize the documents. If you come across in difficulties, please share your experience with us. Please do write it in the comments section.

Some Good References From The Net:

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