Tips to Organize Financial Records

Keeping track on expenses is very necessary. For financial records, you need to keep habit of writing down the expenses before you forget it. Remember to note down even the smallest of the expenses as over the period of time, this number of small expenses merge up to make a big amount which can save big amount of tax during taxation time. Keeping track is necessary as and when we move nearer to the taxation period. While, filing Income tax returns too, you need to provide with this report to government and you surely rely on this data. It also gives you a sneak peek into the earnings made by your assets.

To know about your financial condition currently, you need to have a look at series of paystubs that gives you the information. But, there is something tricky here. You need to choosy about selecting the paystubs that will decide your current situation because every damn paystub won’t give you the idea about the same o that you can get correct guideline which show where you are headed.
As per a general rule, all paystubs and bills can be categorized in four below mentioned categories.

1. Tax Records
2. Income
3. Expenses
4. Miscellaneous

You might usually be saving all of them at a single place but you might need the efforts to sort them out properly so that it can get well organized.

Tax Records

You need to save all your income tax returns and related paper work for at least 2 years after income tax return is filed. If you make major purchases like a home or anything, you specially need to keep track of the income tax returns and gains for that year because, the capital you are using currently has some roots joined with that major transaction.   When you sell home, then also it helps you in gaining more. You can also keep all the paystubs related to home improvements which can also help you in gaining more sale price and also with tax deductions. You can also save all cancelled checks for state and properties, you pay taxes on. You get this amount deducted in your income tax return. You should also save the records of all the charity work done as it gives deductions in income tax return.

Income

Business owners saves all the documents related to the paystubs as proof for five years along with soft copies of their monthly bank statements so that it gives you the idea of the amount of interest you earn. All documents related to stocks, bonds, mutual funds, and other investments should also be saved. They should not be disposed off until 4-5 years after you dispose your owned asset. This includes statements, slips and other needful documents which verify your order. You can also record the name of each and every stock and mutual fund that you purchase, along with purchase price and date, sell price and date and number of shares.

Expenses

Keeping track on expenses is more important than keeping track on income because expenses should not exceed the income. Keeping a paystub for major expenses surely help you in some tax reduction based on the expense. One should have a close eye on outflow of money which can be done by noting down the expenses.

Miscellaneous Documents

Personal verification documents and other major documents need to be saved for lifetime like birth certificate, marriage certificate, passport, policies, will comprise a few.