File Your Piles: Organizing Your Personal Finance Paperwork

By Dawn Handschuh, Personal Finance Writer Archive

If you're the kind of person who tosses bills or other important documents in a drawer and promptly forgets about them, organizing your financial paperwork can help improve debt management, reduce your taxes and your stress during tax-filing season, and improve your money management skills.

How and where you file your financial paperwork will vary according to the length of time you need to hold onto these records.

Short-term records (held for one year or less)

• Utility bills (cable, electric, water, oil, sewer, gas, phone). Hold onto bills you may be disputing, but it's otherwise safe to dispose of paid bills on an annual basis, or more frequently if you choose.
  
• Pay stubs. Shred your pay stubs annually after you've reconciled them with your W-2 form.
  
• ATM and credit card receipts. These can be shredded once you match them to monthly statements.
  
• Homeowners and auto insurance policies. Dispose of the old ones when you get the new year's policies.

Unlike other records, current bills should be kept in a folder, perhaps one marked "Action Items," on your desktop, not hidden in a cabinet or drawer. You might also want to include magazine subscription renewals, social RSVPs, rebate forms to complete or any other items requiring immediate attention in the same folder. If bill-paying is not your forte, consider automated, online bill payments for various expenses.

At day's end, make a point to collect stray receipts from coat pockets, wallets or your briefcase, and throw them all in your "Action Items" folder.

Set aside a regular time, such as every Saturday morning, to spend an hour or so paying current bills and filing paperwork in its proper place. An alternative approach would be to mark due dates for bills on a calendar to ensure that bills are paid on time. Creating automatic email reminders for paying regularly recurring bills is another option.

Mid-term records (held for one to seven years)

• Credit card statements (based on your personal comfort level)
• Bank statements (six years)
• Health insurance claims and other records (insurers may raise questions about past claims or pre-existing conditions)
• Credit card cancellation letters you write when closing an account (these may be needed later if inaccurate information appears on your credit report)

You may also want to hold onto:

• Your most recent annual Social Security benefits estimate
• Your most recent credit report (to protect your credit and identity, you should review your credit report at least once annually)

Choose one location, such as a file cabinet or accordion file, to store your mid-term records. Your filing system can be organized by account type or by month. The trick is to keep it simple and choose a method you can use time after time.

Tip: To reduce the physical space your records occupy, you can opt for electronic statements rather than paper statements. You can also scan paper records and store them on a CD.

Long-term records (held permanently)

Important documents that you use rarely but need to keep for a lifetime should be secured in a bank or credit union safe deposit box or, if you prefer, a fireproof, locked box at home. (Use plastic bags to ensure it's waterproof, too.) Unlike bank or credit card statements, which can be easily duplicated in the event of a flood or fire, replacing your Social Security number (SSN) or birth certificate will be more difficult and time-consuming. Long-term record storage should include:

• Previous years' tax returns (you can dispose of accompanying paperwork, though)
• Social Security cards
• Birth certificates
• Passports
• Life insurance policies (hold onto these until they expire)
• Military records
• Stock certificates
• Wills
• Powers of attorney
• Adoption papers
• Marriage certificates and divorce decrees
• Bank statements for a business (for tax purposes)
• Home renovation records, since improvements (not maintenance) will increase your cost basis and lower your capital gains tax when you sell
• Investment statements (hold for six years after the year you pay taxes on their sale; purge the monthly statements once you get the annual statement)
• Manuals and warranties
• Mortgage paperwork
• Receipts for big purchases, in case you need to establish value for an insurance claim
• Student loan agreements (until they're paid off)

Managing our complex lives requires just a little organization and a system that automates the process. Those who take the time to get their personal finances in order will save both money and time.