Whether you’re budgeting, getting a loan, or proving your income, you need a wealth of finance forms – these help you stay ahead of any document requests. In this post, we’ll outline six great documents and why you should keep a hold of them.
1. Your Budget
Everyone needs a budget to show their spending power, savings goals, and more. This could be weekly, monthly, or even annually; it just needs to give you a clear idea of your financial health.
However, a budget is a lot more than just a list of your incomings and outgoings. Here’s what an effective budget usually includes:
- Income sources
- Fixed expenses
- Variable expenses
- Savings
- Debt repayments
Budgets usually follow the 50/30/20 rule: 50% for needs, 30% for wants, and the remaining 20% for debts or savings. You could even go more specific and, for example, block off 30% for rent or general living expenses.
The right budget doesn’t restrict you. It empowers you to find the right spending balance that fits your long-term financial goals.
2. Your Tax Returns
You should keep the last 3-7 years worth of your tax returns. These prove you’re a taxpayer and help you apply for financial aid and mortgages. Without them, these applications will likely reject you immediately.
You may also find an error years later that warrants correction, which could give you a partial tax refund. You only have 2-3 years to claim this, depending on when you filed the return or paid the original tax; always check your returns even after paying them.
Most importantly, however, you need these to help with potential IRS audits. During an audit, they typically only ask for three years of returns – but this increases to six if they notice a severe discrepancy.
3. Recent Pay Stubs
Keeping hold of your paychecks or pay stubs lets you prove you’re actively earning income; this is handy in many situations. Here are just a few examples of when you need to show that you’re in employment or otherwise refer to your income:
- When applying for a loan
- When renting a property
- When applying for credit cards
- When doing your taxes
- When negotiating a new salary
Keep these for at least one year, though 1-3 stubs from the past few months are usually enough for applications. That said, keeping them for years helps with potential tax issues.
4. Bank Statements
Always check your most recent bank statement once you get it. Not every banking app sends a notification after a payment, so you might notice a charge you don’t remember. The sooner you follow this up, the sooner you can deal with (and hopefully get justice for) potential fraud.
These also help with your budgeting. Each statement is a snapshot of your spending habits; this could be where you realize your “nice-to-haves” take more of your money than they should. The evidence here can act as a wake-up call that encourages less frequent spending.
If running a business, these statements are also very helpful in establishing the firm’s cash flow. You can even run these through budgeting or forecasting software to see how well the company will fare long-term.
5. Insurance Policies
Always keep your insurance policies handy in case of an emergency. You’ll need these to avoid unnecessary charges if, for example, you suddenly need medical care. With the forms on hand, you can contact the provider and quickly make a claim.
Here are some additional reasons to keep your policy documents close by:
- You’ll be able to find and recite a policy’s number easily
- It’ll be much easier to review the documents regularly
- You’ll know precisely when the policies will lapse or expire
- It’ll give you peace of mind about potential emergencies
You should store physical copies in a fireproof safe that only you (or a trusted person acting on your behalf) can access. It’s also worth keeping a digital version in encrypted cloud storage; this should be easy to access while on the go in case an accident happens.
6. Loan Agreements
Many of these documents are vital for securing a loan, but the loan itself is also something you’ll need handy. This will give you a clear idea of repayment terms and deadlines.
You’ll also need to provide this agreement if using the loan for a major purchase. For example, if you’re buying a house and have secured a mortgage, you must be willing to provide proof to the sellers.
In addition, a loan agreement protects you. It outlines your rights and allows you to defend these as necessary, such as if the creditor demands repayments too early.
Final Thoughts
You could arrange several of the above documents via low-cost online templates, which already have every required field. With these forms, you’ll have everything you need to forge a smarter path ahead and keep your budget on track.
