7. Keeping good records

The Importance of Good Record Keeping

Good record keeping is an important discipline as you map out your financial goals. Imagine if you were notified of an IRS audit: How difficult would it be to get all the necessary past information together? If you have all the data in a single, well-organized place, however, you will be ready for any situation.

How do you get organized?

•	One good record-keeping tip is to prepare your financial statements at least once a year   .
•	Ideally, keeping a ledger    will help you summarize all your transactions.
•	A ledger has sections where data is recorded for what you own or your assets   ; what you owe or your liabilities   ; your cash inflows or your income   ; and your cash outflows or your expenses   . Key Steps in Record Keeping Keeping good financial records will save you time and make you money. If your records are organized, you’ll have an easier time: • Compiling a budget • Pulling together an updated financial statement • Accessing your records in an emergency • Preparing your taxes • Preparing for an IRS audit • Defending a credit report Which of the following are important steps in financial record keeping? Check all that apply. Safely disposing of unneeded documents Ensuring that your family and/or executor can locate your financial documents Creating a master list of your key documents Maintaining records for tax and insurance purposes