You’ve no doubt heard your parents say, ‘not another bill!’ when the postman makes his morning delivery. At the moment, these documents probably won’t mean much to you if you still live at home, but it’s important to know about the different types of financial paperwork you could come into contact with in the future. If you don’t understand them, you won’t be able to incorporate them into your budget, and this is where money problems arise. So, let’s take a further look…

Understanding different documents

It’s important to know how to read the most important financial documents that you’ll receive. We’ve outlined some of the most common ones you may be sent below:

• Utility bills – Utility bills include invoices for the likes of water, gas and electricity. More often than not, you’ll receive a bill at the start of the financial year, which will outline how much you owe for the year ahead. You then have the option to pay the amount upfront or you can separate it into equal monthly payments.
• Loan statements – If you’ve taken out a mortgage to buy a home, you’ll need to make monthly payments. You can use a home loan calculator to figure out the sort of payments you could be looking at.
• Direct debit statements – You’ll usually only receive one direct debit statement after it’s been set up. A direct debit is a regular payment. For example, you could set up a direct debit for your electricity bill, and thus ‘x’ amount will automatically be taken from your account every month on a particular day. Once you set this up, you’ll sometimes receive a statement outlining this agreement.
• Bank statements – Nowadays, most bank statements are accessed online; however, you can choose to have paper statements posted to you. This will show you how much money you have left in the bank, as well as your recent transactions. Most people keep on top of this with online banking as opposed to waiting for a monthly statement. Nevertheless, you may need these statements in the future, if you apply for a mortgage or rental accommodation, for example.
• Credit statements – You’ll receive a credit statement every month if you have a credit card or if you use some other type of credit. For example, you may have an account with a catalogue company that you pay off on a monthly basis. Your credit statement will tell you how much you owe, as well as the minimum amount you need to pay off and by when. Let’s say you owe £150, yet the minimum payment is only £5. You’re advised to pay off the full £150 by the date stated; otherwise, you’ll be charged interest on the remaining £145 if you opt for the minimum payment option.
• Pay slips – If you’re employed, you’ll receive a payslip. You’ll get this every month, fortnight or week, depending on how often you’re paid. Your payslip will reveal how much you’ve received for that period, and it will also state any deductions. These are usually PAYE tax (income tax) and National Insurance. At the bottom, it will state the ‘net pay’, which is the amount of money you’ll take home.
• Agreements – A Letter of Agreement is a document that confirms you’re ready to enter into an agreement with someone or something. For example, if you join a gym, you may have to sign one of these. This will state that you are going to pay ‘x’ amount for gym membership, and it will state how for long you agree to do so. This is where you need to be careful. If the agreement says the membership is 12 months long, without cancellation, it means you have to pay ‘x’ amount each month, for the full 12 months – even if you want to cancel early or can no longer afford it.

Organising your financial paperwork

If your paperwork starts to pile up, you should get yourself organised, otherwise you could end up missing a bill payment or something else important. Split your paperwork up into categories and have a folder for each. Categories can include the likes of: credit cards, contracts, bills due, bank accounts, car, employment, loans, insurance and utilities. Each file needs to have four sections: bills to be paid, to do, file and shred. This will help you to keep on top of everything while also making sure you don’t accidentally get rid of any important documents.

Summary

‘Don’t understand it, bin it’ is the wrong approach! You never know what you could be throwing away, and overdue bills can lead to further charges, which is the last thing you want. Instead, handle every piece of financial paperwork with care and have a filing system in place to keep on top of everything.

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