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Organizing Your Paperwork

Martha Stewart Living, March 2008

Keeping your paperwork organized has obvious benefits. After all, who wants to look at unruly stacks of bills that could instead be stored neatly out of sight?

But having a place for everything isn't just about aesthetics. Being disorganized can create extra work and subject you to late fees. The following strategies will help you bring order to your receipts, bills, and statements.

Centralizing
Leaving things scattered around the house is a surefire way to lose them, which is the reason financial experts recommend creating a command center. Ideally, this area -- whether a desk or another dedicated work space -- should encompass an ample surface, a computer, in-boxes for unpaid bills, files for long-term storage, a paper shredder, and office supplies. Other essentials include a comfortable chair and an appealing setting, because if you don't want to sit there, chances are you won't want to work there.

Navigating Bills
There are two phases of dealing with bills: paying and storing. If you're able to submit payment the moment you receive a bill, the first isn't an issue. However, most people must coordinate due dates with their pay dates. The most straightforward approach is to label two in-boxes with the dates of upcoming paychecks. As soon as you open a bill, put it in the appropriate box.

To keep track of bills after they've been paid, store them in file boxes or accordion file folders, organized by month rather than by type of bill. "People go file crazy, having separate folders for their cable bills, electricity bills, etc.," says Barry Izsak, former president of the National Association of Professional Organizers. "Its not necessary."

Reducing Receipts
The deluge of receipts acquired each week can be overwhelming. "One of the things that causes chaos is that people don't know what they need, so they save everything," says Julie Morgenstern, author of "Organizing from the Inside Out." You can, however, get rid of many of these receipts immediately rather than stuffing them into your purse, wallet, or desk drawer. Morgenstern recommends creating an "automatic-toss list," including receipts for groceries and other everyday, non-tax-deductible items. You can save the ones you need to hold on to -- for appliances, medical expenses, and home improvements -- in a separate accordion file, also organized by month. To minimize paper clutter further, consider scanning your receipts and saving them digitally.

Saving Selectively
The beauty of a 12-month filing system is that at the end of the year, you can simply mark the year on the box or the file, and place it on a shelf.

There are, however, a few documents that should be stored separately -- and indefinitely -- including medical bills and claims, tax returns, investment records (such as year-end statements for retirement accounts), anything pertaining to property and valuables (including mortgage contracts and assessments), and legal documents (such as wills and those pertaining to estate planning). Make copies of these and other irreplaceable documents, including deeds, titles, stock and bond certificates, and certificates of deposit, and store the originals in a fire-resistant safe or a safe-deposit box.

Maintaining Order
After you set up your new approach, dedicate some time to its upkeep every week. "The best system in the world won't work if you don't stick to it," Izsak says. Aside from proper and frequent filing, perhaps the most important ongoing chore is purging unnecessary and obsolete paperwork. A good way to manage what comes into your home is to open your mail near a shredder or a recycling bin, so you can discard instantly anything you don't need to retain.

Document-Retention Guidelines
The rules for record retention vary depending on whom you consult. If you have the space, it's better to err on the side of caution.

Auto Records
While Active
Keep these for as long as you own the vehicle. Hold on to sales-transaction data for six years after the car is sold or traded.

Insurance Policies
While Active
After you receive the updated policy, shred the old one.

Warranties and Contracts
While Active
Toss them as soon as they expire.

Paid Bills
While Active
After you receive a canceled check or a credit or bank statement, most bills and receipts can be shredded. For insured purchases, keep paperwork as long as you own the item.

Paycheck Stubs
One Year
Hold on to these until you've checked that the W-2 from your employer is correct.

Quarterly Investment Records
One Year
After you confirm that your annual statement accurately reflects your quarterlies, shred the latter.

Credit Card and Bank Statements
Seven Years
These can serve as proof if you file an insurance claim and as backup for tax documentation.

Receipts and Documentation for Tax-Deductible Purchases
Indefinitely
The Internal Revenue Service can go back at least three years if good-faith errors are suspected, and indefinitely if it believes you have underreported your income by more than 25 percent.

Tax Returns
Indefinitely
These are useful references for checking income or medical claims from a particular year.

House-Related Records
Indefinitely
Save documents pertaining to closings, deeds, assessments, and home-improvement expenses.

Most IRA Contributions
Indefinitely
Keep these in case you need to prove that you already paid taxes on this income.

Annual Investment Statements
Indefinitely
Retain these until you sell the securities. Keep the record of that transaction indefinitely.

Going Paperless
One way to minimize clutter is to eliminate paperwork.

Home Computer
Sign up for online banking and bill paying, saving statements to the hard drive. You can also use a computer to save scanned documents.

Scanner
Turn paper documents, such as receipts, bills, and statements, into digital files with a scanner. Even an inexpensive one can achieve a resolution that's good enough for files that need to be archived.

External Hard Drive
Set up one to synchronize with your computer often, and back up your documents regularly. Look for an external hard drive that has twice the capacity of your computer's hard drive.

Compact Discs
Transfer files (at least one year old) to CDs for long-term storage, and keep the discs in jewel boxes for protection. CDs labeled "archival" are less susceptible to damage.

Comments (16)

  • 20 Apr, 2008

    redguide, I like your tip about stapling your receipt to the instruction book. Great idea!

  • 14 Apr, 2008

    I think the rolling red file box is from Ikea.

  • 14 Apr, 2008

    In the photo, where did you get the red rolling file box. I need one.

  • 14 Apr, 2008

    Thank you! I have looked for similar, concise information with no success. I can now use this to implement new procedures as I re-organize "Mom's Work Station"!

  • 12 Apr, 2008

    I LOVE online banking and bill paying....So streamlined.

  • 12 Apr, 2008

    One tip that I have passed on to many is that when I buy a new appliance [of any size] it always comes with an instruction book, so I staple the receipt to the inside cover and file it in an alphabetical binder just kept for this purpose. Its on the shelf labelled 'Appliances' and every so often I go through it and eliminate the books of appliances that are gone, dead obsolete., sold in sales etc....its a great central location for someone to look something up if I am not around...

  • 11 Apr, 2008

    Thank you! I was wondering for a very long time as to how long to keep all the paper. I also liked the suggestion of the filing by month rather by category. This will save me alot of time and frustration. Again, I thank you.

  • 11 Apr, 2008

    I'd just like to say how wonderful it is with these helpful tips . without them i'd pretty much be lost . it's soo convenient now that we can just scan something like that ! cool! thanks lots ! I will tell my friend about it .

  • 10 Apr, 2008

    I staple my receipts to my statements after I confirm the purchase. It keeps me organized and I can assure that I am not being charged for something I did not authorize.

  • 10 Apr, 2008

    I never thought of scanning and keeping all that junk on my computer !!! whew !!!

  • 10 Apr, 2008

    Thank You! I am going to email this to my husband, the Packrat!!

  • 10 Apr, 2008

    Sorting and organizing paperwork has been a daunting task in the past. Thanks for the list and tips. This is one of the most useful ones I have ever seen. I will definitely use this as a reference for bringing things into order in my home office!

  • 20 Mar, 2008

    YES! All good and the retention guidelines are priceless.

  • 13 Mar, 2008

    Great information, most organizing articles will show a pretty box to store paperwork but give no clue on what to keep or how long to keep it.

  • 13 Mar, 2008

    I like the digtially saving receipts but some places require the original sales receipt for returns

  • 13 Mar, 2008

    Online payment has made things so much easier for me, since I'm a mom with an active six-year-old, a copywriter by day, a freelance writer after office, and a content manager for a pro bono arts-and-culture site. It's difficult to manage these "little" tasks (but very important, actually) if you have a busy life. My bank has tie-ups with utility corporations and credit card companies, so I can schedule payment with ease in the comforts of my home office.