I have no idea what the state of your current financial filing system is, but I have seen all sorts in my time, believe me. Long-time readers will know that I have a clinical aversion to envelopes, particularly when people keep financial documents in the envelopes that they came in, sometimes, if you’re lucky, with something scrawled on to give some indication as to the contents.
But chances are that everyone reading to this has some elements of their filing system that need to be tidied up and sorted out. Sometimes you have to make things worse before they can get better, so the first thing to do before tidying up is to get everything out into one place.
I suggest you clear your dining table or a large area of floor and pull all your financial files, empty all those damned envelopes and get everything into one big pile. Then you need to do a few sweeps through it.
First, you need to put everything together which belongs together. You could start with investments, pensions and life insurance, or skip that step and say, ‘Every policy, investment and pension plan needs to go into its own pile.’
Once that’s done, you need to go through and put everything into date order, with the most recent thing on the top of the pile. Then go through and get rid of anything more than two years old in each pile, unless it’s an original policy document which you should keep indefinitely, or has some relation to tax reporting, which you should keep for six years.
If you’re in doubt about a particular piece of paper, then keep it – no harm in that. But you don’t need to keep ‘with bonus statements’ from 2002 for that old Prudential bond you have. If your hanging files are broken or you’ve written over the labels five times already, treat yourself. Get a new filing cabinet and hanging files and labels. Maybe even get a labeller – I love mine!
There is an incredible release of psychic pressure that comes from tidying up your files. While you’re replacing everything into the filing cabinet, write a list of every individual policy, pension or investment you have in there.
Maybe you’ve found something that you’d forgotten about. It might sound daft, but I vividly remember my first ever client appointment in financial services, for the CIS, with my district manager in South Wales.
We pulled up to a lovely house and my DM proceeded to conduct a thorough fact find process with them, which included them pulling out a small suitcase from behind the sofa in which they kept all their financial papers.
Three times while going through that suitcase they claimed they’d forgotten about some account or other. When added up it came to about £15,000. As I was a 23-year old child at the time, I just couldn’t believe that anybody could forget that they had money in different places. But I’ve seen it happen time and time again, so pay careful attention – there might be riches in them there files!
Simplify
Tidying your files should help you get a grasp of where everything is, IF you didn’t already. And chances are there may be some parts of your financial patchwork that you wonder if you still need.
Now is your chance to radically simplify your affairs. Simplicity will serve you very well in retirement. It removes friction and eases your ability to stay on top of things going forward. Looking (hopefully) a long way ahead, it will also make life easier for folks acting as your attorney or as your executors.
Now in the last podcast season, I did two episodes, one called ‘Getting Current’ and the other ‘Positioning the Pieces’. Listen back to those so you can be clear on what’s needed. They are also included in the e-book we produced at the end of the season.
You want to make things simple enough to serve your purposes, and no simpler. You do not need six different pension pots. You don’t need three ISA investments each on three different platforms. Complexity is not a mark of sophistication; quite the opposite. So do listen to both of those episodes and take action to radically simplify your affairs.
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