Got records? Important personal documents? Most people do. But can you find last month’s bank statement? A copy of your tax return? The kid’s birth certificate?
If your answer was something besides yes, then you might need to get a bit more organized. Organizing can be as simple as a three-ring binder or a filing cabinet. Use a system that works best for you. Keeping organized records will make life a lot easier. So, let’s break out the trash bags and paper shredder, face down the piles of paper on the dining room table, and get started!
Step 1. Collect & Organize Important Records
Start by collecting and reviewing the documents and information that you already have. Sort and categorize your important documents into five categories as follows: (you can use as a guide or use this list as the basis for your own system).
- Home and property records – mortgage, property deeds, home improvement projects and receipts, appliance manuals and warranties, property tax information, home insurance policies and manuals
- Auto records – titles, maintenance records, insurance policies and information, loan information and payment records
- Health records – insurance policies, health insurance benefits manuals, explanation of medical benefits, doctor bills, prescription lists, flexible spending information, medical receipts, life insurance policies; If you have pets, you can also include their important documents such as veterinary and vaccine information in this category.
- Financial records – bank statements, tax returns, tax deduction records, investment records, loan records, credit card statements
- Electronics records – cell phone contracts and manuals; sales receipts and warranties for computers, laptops, and iPads; cable and Internet plans and bills; wireless router sales receipt and manual
Step 2. Safeguard your permanent records
Permanent records that are difficult to replace should always be kept in a safe place. Whether in a safe deposit box or a fireproof safe. These documents contain sensitive personal information that could be compromised in the event of a fire, burglary or any other disaster in your home. Keeping them safe or keeping an extra copy in a safe deposit box will give you the basics you need to reestablish your financial life.
Here’s a list to get you started:
- Birth certificates for every member of the family
- Social Security Information
- Adoption papers
- Citizenship papers for every member of the family
- Marriage certificates
- Divorce decrees
- Veteran’s papers
- Wills (keep one copy in the safe deposit box and one copy at home for easy access)
- Funeral Plans and burial site information
- Death certificates
- Deeds for real estate
- Special papers, such as patents and copyrights
- List of your current accounts, with addresses and account numbers
- Anything that is government or court-recorded
Request copies of any important documents that you do not have. Arrange them in order by categories and by date, that way you will be able to quickly find information.
Step 3. Discard what you don’t need
Most people dread organizing their records because they keep far more information than necessary. Papers are only needed to remind you of the details of a transaction, for legal reasons, or for IRS reporting purposes. Keep it simple. You don’t need cancelled checks from 15 years ago, but you do need a list of your current bank accounts. Think: Why do I need this? When would I use it? Where will I look for it?
For tax purposes, keep papers that substantiate your income and expenses for at least three years in case of audit. If you failed to report more than 25 percent of your gross income, the IRS has six years to collect the tax or to start legal proceedings.
But you don’t have to keep everything. You can lighten your load by discarding certain statements once they have served their purpose. For example, throw away weekly or monthly salary statements after you check them against your annual W-2 Form. You can also discard any non-tax-related items if you no longer have a need for them.
Step 4. Maintain it
Once you get your records organized, the last step is to keep it free of clutter and, well, organized. In order to keep the documents organized and in the right place, be sure to file any new bills or records in the system immediately.
Well organized records can save time and reduce the stress of finding misplaced documents when you need them in a hurry.
Allow yourself the time you need to organize and store your records. You don’t have to do it all at one time. Ask someone you trust to help you if it becomes too overwhelming.