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In order to effectively reduce your debts and fix your credit
history, you are going to have proper organization and effective
ways to keep track of your financial records. To make an effective
filing system, experts recommend alphabetizing your relevant
documents by subject or category. But don’t make the mistake
of having too many or too few categories. A dozen broad categories
should be the maximum in any filing system. Therefore, a sample
file index might include categories for:
Banking records (including checking and savings accounts)
Bills paid (where you file regular monthly expenses)
Budget (for itemized listings of all your expenses, income
and assets)
Credit cards (useful for storing receipts, statements and
contracts)
Insurance (auto, health, life and property insurance records)
Investments (such as 401(k) and mutual fund reports)
Mortgage
Receipts
Taxes
Once you’ve gotten your files labeled, you may wonder
how long you should keep certain financial documents. As a
rule, you should keep old tax records for at least seven years
because that’s how far back the law allows the IRS to
go when it wants to audit you. You should also hang on indefinitely
to your stock, bond and mutual fund statements - mainly because
if you sell any of those investments later, you may need to
demonstrate the cost basis of your investment to the IRS.
However, you don’t need to keep those prospectuses that
mutual fund companies mail you each quarter, so you can safely
toss those.
Maintaining Your Filing System
Once you’ve got a working system, of course the final
step is to stay on top of your paperwork, so that it doesn’t
spiral out of control again. Experts say you should resist
the urge to have general mail files - like the all-purpose
“in” and “out” baskets that seem to
occupy almost every home office and work desk space. Instead,
create a paper-flow system that instantly tells you what you’re
supposed to do with the mail that’s held there.
Once you weed through your files, purging unnecessary paperwork
and reducing the amount of piles you have stacked up, chances
are you’ll be a lot clearer about your finances –
and certainly better organized. What’s more, if you
take a few minutes each day to tackle your paperwork, you’ll
save yourself many hours - if not days - of having to wade
through a morass of papers later in the year when you’re
trying to find some important document. This is particularly
true when tax time rolls around. Imagine how great it would
feel if you didn’t have to go sifting through old piles
of paper trying to justify all your tax deductions. Instead,
you could simply turn over to your accountant or to a paid
tax professional a nice, neat file of well-organized receipts
and records.
Benefits
of a Debt-Management Plan
For about 25 percent of those who turn to credit counselors,
more than advice is prescribed. In these cases, in addition
to an action plan, a debt-management plan is recommended.
A debt-management plan (sometimes called a debt-repayment
plan) involves the agency as an intermediary (for a small
monthly fee it handles both communications and payments on
your behalf) and it includes revised payments that:
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