From Piles to Files

How many times have you had guests coming over and you needed to move that pile of paperwork from your kitchen counter to your office or your bedroom so it’s out of the way? When you moved it back, I bet it was out of order and then you couldn’t find the receipt you were looking for to take back that thing you bought and didn’t really need. You probably found the receipt two days later after you were already forced to take store credit over a refund. Does this sound familiar? If so, you’re a totally normal human being. This week, let’s get better organized for the new year! I’ve put together 5 steps below for an effective home filing system to help you get started.

1)    You’ll need some supplies, but you won’t need to spend much. Depending on where you plan to keep your files, you can use a file box or filing cabinet with some hanging files and individual file folders. Or, you can purchase a fairly inexpensive 9.5” x 13” accordion file folder (or two if you need more slots). You’ll also need a pen or a label-maker to label each of the files.

2)    Create the following labels:

3)    Start digging through that pile of paperwork and sorting items into their respective folders. Recycle the envelopes and store each document as flat as possible to save space in your files.

4)    Start a daily routine of getting out your filing system and sorting your mail as you open it. File the day’s receipts in the appropriate places as well, and don’t forget to set reminders for yourself to pay bills on time or follow up on anything that needs your immediate attention. If you’ve taken care of an item, mark it appropriately and file in the proper place or shred the notice. You can also keep a notebook or scrap paper in the front of your files with a running to-do list so it’s all in once accessible place.

5)    Most records should be kept for at least 3 years because that’s how long the IRS typically looks into your history in the event of a tax audit, although they can look back up to 6 years. It is suggested by most financial planners that you keep anything related to taxes, such as receipts for deductions, records relating to the sale of a home, small business income, etc. for at least 6 years. However, if the IRS suspects fraud, they can audit an unlimited number of years of tax returns. So, keeping all of your tax records is a good idea. Perhaps consider keeping a separate file just for annual tax returns and supporting documents.

Important documents like birth certificates, life insurance policies, property titles or deeds, estate documents and marriage certificates should be kept in a safe place such as a fireproof/waterproof safe or a safe deposit box at a bank. These should not be kept with your daily filing and should not be disposed of at any time.

Things you can shred, burn or otherwise dispose of securely at the end of each year are things like bank deposit slips, paycheck stubs, unnecessary shopping or dining out receipts and utility bills. This will keep your files from getting too full.

Getting started with organizing your important financial documents can be a great way to start the year off right. The sooner you set up a system that doesn’t include piling your paperwork on the kitchen table, the better off you’ll be when you need to locate an important document…or maybe the receipt for that thing you needed to return.

- Margaret Gooley, CFP®, Worley Erhart-Graves Financial Advisors