Organizing your personal belongings is one of the most tedious, put off and difficult tasks for people to do. From not knowing what items to hang on to and how to organize them, important information and documents tend to get lost in the mix. This can become particularly difficult during important times such as; buying a house, filing taxes, applying for a loan, keeping track of expenses and many more. The benefits of beginning to organize your files can far out weigh the initial headache. Here are some ways you can begin to organize important documents:
File Cabinet – File Types
- Medical file for each family member
- Home maintenance file, with receipts of major expenditures
- Real estate documents
- Insurance policies (create a file for each one, and label each year’s policy separately, to know what years you were covered with what policies)
- Automobile documents (separate file for each car)
- Credit card documents (this is different than the file for credit card bills, and should contain the agreement, privacy policies, etc. that you get in the mail) (one file for each card)
- Banking records (one file for each account at each bank)
- Loan documents (one file for each loan)
- Investment records (one file for each investment, 401(k), IRA, etc.)
- Vital records (such as birth and marriage certificates, will, etc.)*
- Personal home inventory (another copy should be kept outside the house too)
- Tax documents (instructions for organizing these found in the article about how to organize old tax files)
- Monthly bills and receipts (instructions for organizing paid bills can be found here and organizing receipts here)
- Warranties and manuals (more information on how to organize warranties and manuals can be found here)
* Vital records can be stored in several ways, including a safe deposit box at a bank if you wish, instead of with the rest of your files. Seriously consider this if you don’t, at least, have a fire resistant file cabinet or storage system for these papers. You can read my article on how to make a vital records file, and how to protect and store its contents here.
How long to keep important records
Store permanently: Major financial records & tax returns
Your tax returns are important documents to keep as part of your financial history. You’ll want to keep a permanent electronic or hard copy of each year’s tax return and any payments you make to the government. Additionally, it’s a good idea to hold on to records of major financial events, such as legal filings or inheritances. You can easily access your paperless statements and documents online and keep them safely stored there.
Store 3–7 years: supporting tax documentation
Depending on your filing circumstances, the IRS may be able to ask you for supporting documentation for three to seven years after you file a return. Knowing that, a good rule of thumb is to save any document that verifies information on your tax return—including Forms W–2 and 1099, bank and brokerage statements, tuition payments and charitable donation receipts—for three to seven years.
Store 1 year: regular statements, pay stubs
Keep either a digital or hard copy of the past year’s worth of your monthly bank and credit card statements. It’s a good idea to keep your digital copies stored online if you choose to go paperless. You should also hold on to pay stubs so that you can use them to verify the accuracy of your Form W-2 when tax season arrives.
Keep for 1 month: utility bills, deposits and withdrawal records
If you’re self-employed, you may need your utility, cable and cell phone bills for tax purposes. Otherwise, you can dispose of them as soon as you verify your payment was processed. You can also dispose of bank withdrawal and deposit slips after verifying them with your monthly statement.
Safeguard your information
For physical documents, designate a safe, out-of-the-way place in your home to store all paper records that protects them from damage or theft. For digital records, be sure to archive and back up all electronic records. It’s a good idea for these records to be password protected.
Guard your financial accounts
Use complex passwords to keep your account information safe. Make sure your username and password combination is different from the ones you use for personal email, online merchants and social media accounts. Protecting your computer with antivirus software is also a good idea.
Properly dispose of paper documents
You’ll put yourself at risk of fraud or identity theft if you simply throw away a large pile of private documents, such as financial statements. Invest in a cross-cut shredder that will eliminate all traces of your personal information, or search for free shredding events in your community. Having paperless statements and documents can help reduce the risk of identity theft posed by lost or stolen mail.
TK Accounting & Consulting 