Basic Finances Part II: How and Why to Store Receipts OR Keep a Check Register

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Basic Finances Part II: How and Why to Store Receipts OR Keep a Check Register

Do you use a check register to keep track of what is in the bank account? If your answer is NO, that doesn't surprise me. It used to shock me, but that was before I realized that in this 'computerized' age of finances, most people don't. They just check their account online, or look at the balance on their ATM slip.  And if you are like many people these days, including myself, then you hardly ever write a check. We write a check for our tithe at church and for the garbage lady (she and her hubby drive a pickup out to our house in the country to get our garbage and take it to the local dump). I write checks to friends if I'm out of cash..or for gifts long distance. But for 90% of our everyday financial business, we use a debit card, as I'm sure you do.

My teenagers could not understand at all why someone would want to 'reconcile' a bank statement or keep a check register.  And I'm finally beginning to understand their reasoning.  But the resulting 'receipt mess', and the lack of a real picture of what's 'in the bank', can lead to some serious financial problems.

Most of us swipe our debit cards and tuck the receipts safely into our purse, because somewhere in the back of our minds, we think we will do 'something' with them or need to keep them.  If, like me, you plan to enter them into a computerized check register like Quicken, then you take them home and put them in a basket or bin, to be entered in when you 'have time'.   But some of you just keep them in case you need to return something later. Or perhaps you keep them because you know you are supposed to..for taxes or something or in case the IRS audits you.

There is some validity to the IRS issue. We DO  need to either keep the receipts OR enter them into a check register. But we don't have to do both unless the receipt is related to a tax deduction or a major purchase.  You can read more about the 'rules here and here. The IRS considers a check book register online or on paper a perfectly acceptable proof of your day to day finances. They also consider a credit card statement and probably a bank statement in the same light, according to my accountant.  What you need is a list of all your transactions and who they were done with and for what. That's your 'paper trail'.  You need to keep three years of this paper trail.   That means you can throw away everything before 2007. The reason for the three years is that that is how long you have to amend your taxes. After that, you don't need them. (There are a few exceptions like if you have not reported 25% of your income at any point.Then they say at least six years.)

If you hand write your transactions into a register as you do them or type them into a computer check register, then you are perfectly safe to throw those receipts away. Throw away receipts for food, gas, and misc unless they are business related expenses.  KEEP receipts for clothes, home repair supplies, and household items because you never know when you might decide to return those things.  I can thank my husband for showing me what his parents did with the receipts they kept.  They simply wrote the month and year on a long envelope every month. Then they tuck all the receipts and bill payment stubs in that envelope. At the end of the month, they filed the envelope in a shoe box, and started a new one. This has worked for us for 23 years! It's so simple..really.

How to File The Receipts You Collected
First divide them by month. You should have Ten piles. (If you have receipts from last year or the years before, just divide them by year and file in a big manilla envelope. Save only the last three years worth.)
Put them in long envelopes and write the month and year on the front of each one.  This month's receipts should go in an envelope labeled Oct after you  have a check register, make sure you have entered all of these receipts in it. Then mark them with a check mark to show that. Then file them all

Why You Might WANT to Keep ALL of your Receipts

If you would like to be able to tell how much you are spending on your budget categories, you will want to go one step further and write the names of every part of your budget like groceries, clothes, gas, etc. on tabs in the long envelope sized accordian file I mentioned. I often do this when I think we are having trouble, or dear hubby is wanting to see where all the money is going. After entering the receipt in my register, I file it under the tabs according to category. At the end of the month, we staple them all together and write an approximate total on the top receipt. This is a very eye opening experience! We discovered we were spending WAY too much for snacks on the road last month! At the end of the month, stick all the receipts in the Oct. envelope and file them away.

So why keep a check register? The biggest reason to keep a check register is to know what is left in the bank as we are spending our money!  Some things like, checks, take a while to clear the bank. Your ATM slip may say you have 500.00 in the bank, but if you just wrote a check to a repair guy for $250.00, then your real balance is considerably less than what the bank thinks it is. Or perhaps you have made a deposit. It can take several days for a deposit to actually show up on an ATM slip. If you keep a running tally of your deposits, checks, and atm transactions in your check register, YOU will know how much money is really 'in the bank' sooner than it will show up online.

Honestly, I had just been writing down the checks in my check register as I wrote them so I would have a record to enter into my computer later on. I keep everything perfectly up to date on my computer check register. But one big problem with having a computerized check register is that you can't take it with you to the grocery store, gas station etc. Unless I went home, entered all of my receipts on a daily basis, and then got a balance, I didn't know how much we had spent and how much was left. I got so out of the habit of entering my transactions into the register, knowing that  I could just download the transactions online, that I never really knew where we were financially, sometimes until we were down to the wire. Then we would run short, and have to carry over a few expenses into next month. (This is called DEBT.)

That's when it hit me like a BRAINSTORM! I needed to REINSTATE the habit of keeping my checkbook register balance up and writing BY the store, every transaction being removed from the bank either by check or BY ATM.  That's the beauty of having a check register where you enter your balance (from online or from your ATM slip) and then subtract everything AS YOU SPEND IT. If you have to do your subtracting in the car after you get out to it..fine! But at least write down the transaction at the counter of every store. Write what you spent it on too..clothes etc. That way you know where your money is going.  Remember last week when I said that if you want to get out of debt or stay out of debt or save money for the future, you must know what you have in the bank at all times. 

We need to know what the impact of every purchase will have on our finances or we won't be willing to say NO to ourselves.  A check register (either paper or a program on an Ipod or Iphone) will give us this information..if we develop the habit of keeping it up.  Just enter what you have in the bank at the top of your register column (as best you know it), and then write in every check that you believe has not cleared the bank yet. Now, keep that baby with you and subtract every bit of money you spend from that balance. Keep the balance up to date. Slow down your shopping enough to do this..and maybe you won't spend quite so much...  It's a habit we all need to we can have Financial Peace!

If you would rather work with just cash or would like to use receipts to help you track your spending, stay tuned for Part III.  I'll also get you that 'hubby list'.  But for now, I'm off to substitute teach for my son today.  I hope to visit and leave some comments later today. Have a great week and 

Happy Homemaking!

1 comment

Trudy said...

You're the best, Donna. Thank you!

“There's nothing half so pleasant as coming home again.” ~ Margaret Sangster

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