IMAGINE we are playing the game “Bring Me” which is really a hit during children’s parties. The host then says, “Bring me…your pay slips for the last three months!”
Will you be able to provide the said document? Having documents related to your financial activities stored in safe location is important. A common example of not doing so is the tendency of family members to not see the insurance policy of a family member who passed on because it was not kept in a safe location known to other members. Another example will be an asset that was not included in the estate because only the deceased knew that it existed. Think of the possibility of missed benefits for the household because of overlooked and mishandled documents.
What then are the important financial documents that a household must file? These are the following (adopted from Kapoor et al., 1997):
1. Money management records (balance sheet, cash flow statement and budget)
2. Personal records (birth certificate, marriage certificate (if married), identification cards, passport, SSS/GSIS records, Philhealth records, medical records, etc.)
3. Employment records (employment contract, employment benefits, pay slips, etc.)
4. Tax records (i.e., income tax returns)
5. Credit records (i.e., credit card statements)
6. House and car records (ownership titles, amortization contract and payment records, lease contract if renting, etc.)
7. Insurance records (hard copies of policies for life, health, car and home insurance)
8. Documents related to big-ticket items (e.g. appliances) such as receipts and warranties
9. Estate records, wills, and trusts
10. Investment records
It is understandable that you may think that the list is quite long. However, think of the convenience that this will provide you once the files are secured and kept—all the important documents that you need are just within your reach!
In 2009 during typhoon Ondoy and our house was flooded, luckily my parents were able to keep all files in a rigid plastic case so keeping the documents safe was easy to do.An important thing to note is that there should be two people who know where the records are so that the documents will not be overlooked in the future.How do these documents affect your financial security and your pursuit of goals? Having these documents kept well and on hand facilitates effective review of your financial situation, from reviewing your balance sheet and cash flow statement, updating your social security records and government benefits to keeping stock of your insurance coverage.
Updating of these documents can be done quarterly or twice a year. To manage the volume of the documents, it is advised that you keep documents within the past three years and in case you are considering to destroy (yes I mean it – these are confidential info that should not fall into other people’s hands) some of the documents, consider creating a soft copy of it first and storing it in a hard drive or secured cloud. Creating this record could not be done overnight and may take some time. As such, it is advised that you go through this record-keeping activity with a system in mind. These are my suggestions:
1. Start securing documents for the items that are most important for you (based on your priority) first, then work towards the lower priority
2. Start securing documents that are with you already (begin with documents that are already available and easiest to obtain)
It will take some time to organize these papers and records; however, seeing the compiled documents stored in an organized manner in a case or binder will be a sight to see and will provide you the positive mental impact that you are beginning to have better control of your financial situation (remember, mindset is important!). Being organized provides a psychological victory and is likely to help you on your journey in taking control of your finances.
John Hero Salvador is a registered financial planner of RFP Philippines. To learn more about investment planning, attend the 98th batch of RFP program this September 2022. To register, e-mail info@rfp.ph or text at 0917-6248110.