Is the paper mess at home getting the best of you? Are Christmas cards flowing in; followed by tax documents after the New Year; and then mixed amongst all that is the regular mail and papers from school? If you’re like me, it can feel like you’re buried in paper this time of year. It's a new year, so make a change and get that paper mess under control.
Where to Store Documents?
Before we begin tackling which items to keep it's important to make sure you have a safe place at home to store your documents. For at-home storage, I like to use a waterproof/fireproof safe for tangible items. Important documents should also have a digital copy stored securely elsewhere. There are a few ways you could go about storing digital documents:
Flash Drive on Key Chain (be careful, don’t lose your key chain)
Encrypt important files, then use Google Drive, Drop Box or One Drive to store them.
Use encryption-based cloud service to store files like Sync. Sync offers a free plan to get started.
Which Items to Keep?
Birth Certificates
Marriage Certificates
Divorce Decrees
Wills
Life Insurance Documents
Vehicle Titles
Military Service Records
Education Documents – Diplomas & Certificates, Copies of Transcripts
Contracts that are still enforceable
Loan Document s- for current loans only (for paid loans you only need to keep the "Paid" stamped copy from the bank.)
Home Improvement Receipts – This is for larger improvements only. Keep these receipts until the house is sold. These receipts can be used for a business-use of the home deduction (for eligible taxpayers) or to reduce any potential gain you may have on your taxes when you sell your home.
Medical Bills & Explanation of Benefits from Insurance – keep up to 5 years, longer if bills are disputed
Tax Returns – Keep these for 3 years. I know a lot of people think tax returns need to be kept for 7 years, but the 7-year rule applies to fraudulent tax returns or returns with a misstatement greater than 25% of the tax, meaning - you messed up big time!
Investment & Retirement Plan Records – 401K and retirement accounts, Stocks, and bond investments you have. No need to keep every quarterly statement. You could keep your year-end statement, if you wish. It's important to keep investment purchase records and sale records for 7 years following a sale.
Medical Records – immunizations, medical files with doctor’s notes, or digital images of scans or x-rays, medical history
How to Purge Documents?
The safest way to purge documents is to shred them. You can shred them yourself or bring them into a shredding service. Most big box office stores offer a shredding service like Office Max or Office Depot. There are some documents that won’t require shredding. Those could include paperwork that comes home from school, or ads and junk mail that comes without any identifying personal information.
Now if you start to panic at the thought of shredding something up because you feel that as soon as you shred it you will suddenly need it again. Go ahead and scan or take a picture of any of those documents you want to make sure you still maintain a copy of. Store them on your computer or utilize one of the methods we discussed for the “Keep It” documents.
Which Documents to Purge?
Non-Business Bills
Pay stubs – for prior calendar year. Once you receive your W2 for the year you can go ahead and purge these paystubs.
Bank Documents – ATM receipts, cancelled checks, deposit slips - purge these items once your monthly bank statement is reconciled.
Mortgage Statements – over 1 year
Expired warranties – no point in keeping something you can't enforce
Personal Bank Statements – purge once reconciled. - Reminder: All your bank statements are available online at your bank.
Social Security Statements – for the prior calendar year. Once you receive your 1099 from Social Security you can go ahead and purge these statements.
Personal Credit card statements – purge once reconciled.
Expired Insurance policies – again, can’t enforce something that’s not in place.
Schedule Time for the Paper Mess
Knowing what to keep and what to purge is one thing. But it means nothing if you don’t put it into play. This means you need to set some time aside periodically to work on tackling your paper mess. Go ahead and set up your calendar with an annual reminder to work on your paper mess twice a year.
The first time during the year to tackle your paper mess is just around the corner. January or February is the perfect time to go through the prior year's documents in preparation of tax time. Once you have received all your tax documents for the year go ahead and review the paper mess for the following things:
Review bills & mortgage statements for anything dated for the prior year - purge it
Once your W2 is received purge all the prior year paystubs. Some people like to keep their last pay stub. If you do, just keep it with your W2.
Purge any Bank Statements or Credit Card statements you’re still hanging on to that have already been reconciled.
Purge all those social security statements once you get your 1099 from the Social Security Administration.
The second time I like to go through documents again is once school starts in August or September. Now this is a little bit of personal preference for me because I begin to have a quieter house during the day once the kids go back to school, but it’s also far enough away from the last time you went through the paper mess. This purge session has a different purpose. Our purpose in January or February was to get ready for taxes and clear out the unneeded info. The purpose of this session is tackling a lot of those not-tax related items. During this session we are going purge:
Expired Insurance Policies. – Check what the date is, anything expired - purge it.
Expired warranties –Try to look for warranties expiring soon in case there are some you want to extend in time
Purge any bank documents still on-hand for reconciled accounts – ATM receipts, cancelled checks, deposits slips
Purge loan statements for any debts that have been paid off in the last year
Create an Ongoing System
The easiest way to tackle your paper mess is to get in the habit of purging these documents as soon as you are done with them. Do not wait for the purge session to do these:
Purge Bank Documents as soon as you’re done reconciling the statements
Purge credit card receipts as soon as you’re done reconciling the statement
Throw any non-business receipts as soon as they are recorded in your check register
I've included a free printable "Keep It or Purge It List" to help you when going through your papers. Get after that paper mess today and never be drowning in paperwork again.