Get rid of this one thing in your financial paperwork

I quite often have to do some filing for my clients, and very often I come across a tell-tale sign that something is wrong. This one thing makes their lives confusing, makes it impossible to tidy up their affairs effectively and bulks out their files so their filing cabinets are bulging. What is this one thing?

It's an envelope.

Yep, this seemingly innocuous encloser of paperwork is more than just a piece of stationery, it is a clear indicator that its owner has given up.

So many people get letters, statements and other documents through the door, and follow this timeline of events:

1. Open envelope
2. Skim read first page of contents and realise it is something financial that they should probably keep
3. Put contents back in the envelope
4. ‘File' the envelope in the third drawer down on the left

I get it. Financial paperwork is dull, and we get so much of it that we can feel like were drowning. But that's no way to stay on top of your finances. This approach is burying your head in the sand, and the envelopes are just a symptom of that – a dead giveaway that you have stopped engaging with your own financial future. But if you don't engage with it, who else will?

It's up to you

Here's how to banish the envelope forever, get on top of your financial paperwork and take control again:

1. Read the covering letter

Any financial communication will have a covering letter. You almost never need to keep this, but you should always read it. It will tell you what the contents of the envelope are about. Assuming the covering letter isn't all that's in the envelope you can now proceed to step two.

2. Decide whether you should keep it and if so, for how long

This is where most people struggle to know what to keep and what not to keep. So they end up keeping everything. In envelopes. Grrrr.

Here's a list of what you should keep, and crucially, how long you should keep them:

• Bank statements: 1 year
• Utility bills: 1 year maximum, probably just the most recent one
• Employment related documents like payslips: 2 years
• Tax-related documents like annual tax vouchers for investments, P45, P60, statements of interest on bank accounts: 6 years
• Policy documents for insurance: The term of the policy
• Investment statements: Just the most recent copy.
• Receipts: For the life of the purchased item

Some items might require you to actually do something. In which case, there's more information about whether to do, file or shred in this podcast session.

3. Shred and recycle the rest

You can probably recycle the following without too much hesitation:

• Covering letters, unless that's all that the envelope contains. In which case go back to step two and make a decision.
• The accounts and resolutions at the AGM of your building society/investment fund/shareholding (If you're an active investor, then this might float your boat, but in my experience most people don't read them and they just take up space).
• Flyers/Brochures for other products sold by your provider
• ENVELOPES!

Make sure you shred anything with any personal information such as name address, policy numbers etc on it. If in doubt, shred it anyway. Cutting it up with kitchen scissors probably isn't good enough and shredders are not expensive.

A compromise solution

For those of you who just can't bear to get rid of anything, make your life easier and have a filing cabinet, easily accessible, with just the latest paperwork in it. Then set up an archive box somewhere like your garage or loft, where the older stuff can be kept ‘just in case'.

If you haven't accessed the archive stuff in five years you can definitely get rid of it. Or just leave it there; your call.

Tidy files: Tidy mind

Having your financial paperwork organised means you know that you can find what you need when you need it, and that takes a lot of subconscious mental strain away. This makes room for strategic planning, because you know the short-term stuff is sorted.

The initial sweep of your filing system might take a couple of hours, half a day or even longer. Why not crack a bottle of red, throw on some mood music and make a night of it.

Just promise me that you'll never, ever keep another envelope again. Deal?