With so much digital filing, automatic bill paying, online banking and scanning, somehow we still find ourselves with an overabundance of paper everywhere we turn. Tax day is ingrained in our minds (often more than a mother’s birthday), and there are mounds of papers to sort. What do you do with everything? The yearly “file purge” entails knowing what to keep, what to toss, what to separate and how to blend old tax returns and new documents coming in. These are general purpose guidelines to give you an idea on how to start the process of clearing out file folders and boxes of legal, financial and personal papers.
- Some things should never be thrown away. For birth certificates, social security cards, trust documents, marriage/divorce/adoption certificates and retirement records, consider storing these permanent papers in a safe deposit or fire safe box.
- Business records need permanent storage. Permanent files are needed for financial statements, licenses, corporate documents and receipts. Permanent files should be stored in a separate area away from daily action files. Plastic storage bins with tight-fitting lids are a better storage option since plastic protects papers from bugs and humidity. Clearly label each bin with the date and content.
- Keep individual tax records for six years (generally). When you Google “How long should I keep tax records?” the varying answers will make you crazy. Your particular situation will determine the length of time to keep old tax records, anywhere from three years to forever. Tax laws change every year, so the best rule is to consult your accountant or attorney who is familiar with your life situation before throwing anything away. “When in doubt, ask!”
- Keep general household bills for one year: For non-tax related papers, like bank statements, utility bills, credit card receipts and miscellaneous purchases, set up a simple filing system with file folders and labels. These will be accessed monthly and purged yearly.
- “What do I do with this” category: Common sense plays a big part in hanging on to warranties (keep as long as you own the item), bank deposit slips (until reconciled on your bank statement) and insurance policies (keep for the life of the policy).
The organization is key. Active, reference and permanent are the three main categories of paper retention for both office and home. Keep active files close at hand; have reference papers easily accessible; and permanent files should be clearly labeled and stored in a safe place. Clutter happens when you mix the three and have 2015 tax returns on top of last month’s bank statement in the kitchen. (Sounds like a game of Clue because we don’t have a “clue” where something is.) With these few simple tips, you can determine whether you need to keep it or shred it. It’s that simple.