Tidy Files Equal Tidy Finances

by DenverBookkeeper

You are going to clean up your finances by trashing old paperwork that serves no purpose, and develop a system for keeping your important documents, bills and statements organized. Your financial clutter needs an overhaul every now and again, and the benefit goes beyond the psychic satisfaction of straightening up your space.

Tidy Files = Tidy Finances

A pile of unopened statements and bills is a sign that someone is not mindful of what’s coming in and going out. When you consciously open, read and file away those bills and statements you are connecting with your money and taking control of your life.

Begin by gathering up all your documents, Pull out stray files, grab that latest round of bills, empty that office drawer that they are stuffed in and sort everything into 6 piles:

  • Monthly bills, bank statements and pay stubs
  • Investment Statements (401k, brokerage statements, etc)
  • Tax Returns and supporting documents
  • Policy documents and deeds (insurance, house deed, car title, etc)
  • Warranties and User Manuals
  • Forever Documents (marriage license, will, birth certificate, etc)

Now, create a folder for each type of document, except the forever docs, and add new papers as they come in. Then create folders within the folders: Take ongoing bills, for example. Store all gas bills in one folder, electricity bills in another, cable bills in another and so on. For the forever documents, invest in a portable fire and water resistant home safe, something you can grab at a moment’s notice. Not bank safety deposit boxes because you don’t have access 24/7 and should something happen to you, your relatives may not be able to access it.

Now, how long you hang on to these depends upon whether or not you are claiming the home office deduction on your income tax returns. If you aren’t, then ongoing bills and pay stubs can be shredded after one year. If you are, then these are supporting documents of your tax return and you should hang on to them for a minimum of three years, six is better since the IRS can challenge another three years if they suspect you haven’t reported income. I recommend that self-employed folks and those with multiple revenue streams hold on to 10 years of records, just in case. This includes copies of bank statements along with all the other supporting documentation. Keep the forever documents….well, forever! Keep policies as long as they are active and warranties for as long as you own the item.

Leave a Comment

CommentLuv badge

Previous post:

Next post: