Build in Your File Maintenance

If 'getting the paperwork filed' isn't happening for you, consider simplifying your system and build in the file maintenance.

For example — you may intend to hold on to your tax returns and documentation for seven years, but it often turns into many more years than that because you never find the time to clear away the out-of-date files. When you do make the time you usually find a drawer crammed full of paper and over-stuffed file folders. You probably labeled the folder with "Tax YYYY" so a whole new label has to be made.

First, ask your tax accountant or read the IRS document about the period of limitations (How long should I keep records?) to see how long you need to keep the records. Decide for yourself how long you want to keep them. It's important to establish your guideline for archiving your paperwork ahead of time. It makes the decision to keep or let go that much easier and quicker.

Though the IRS may only require that you keep records for three to seven years, I often recommend to clients a system that has the maintenance routinely accomplished in smaller chunks of time. For more on how long to keep your records check out How long should I keep this?

Build in Your File Maintenance

If you will keep the paper copies then set up ten flat-bottomed hanging file folders (the color choice depends on your preference for cost and visual interest). Create labels for the folders — 0, 1, 2, ... through 9. Your 2027 taxes and documents will go in the hanging file folder labeled "7". Your 2028 taxes go in "8" and so on.

Tool: Pendaflex - 2" Capacity Reinforced Hanging File Folders. Flat bottom. Available from Amazon*

When 2026 taxes are done, you can then remove and shred the 2016 paperwork from the folder marked "6" and plop in your 2026 papers (if you're still choosing to do paper returns.) The maintenance is automatically built into your filing system and you only have to get rid of one file at a time. Yes, you've kept your tax paperwork for longer than needed (assuming you don't need to keep it forever) but you've simplified your maintenance. No more relabeling, no more hours of shredding, and no more overflowing file drawers.

A similar system can be set up for your mail processing (aka bill paying). And you don't necessarily need to keep every monthly bill or statement. Establish your retention guidelines*.

If you choose to keep them — build in the maintenance. Set up twelve file folders and label them January, February, March, ... through December. As you pay your bills, review your statements, or hold on to your receipts, you can open the current month's folder and drop the paperwork in. No more searching for the labeled folders of each utility or bank only to find it's too full.

Wondering what happens if you need to find the electric bill from last July? You may be worried you might have to go digging through the July folder. You're right, you would have to sort through the other July bills to find it, but that should only take a minute or two at the most. It won't take that long to find it because you actually filed it and know exactly where the file is!

You could also go paperless. You may have already chosen paperless statements for many of your bills. Don't go paperless on your credit card statements unless you are confident that you will go online to check the statement every month. Your utility bills remain fairly constant and fraud is unlikely. But with your credit card, you need to review the purchases each month and a paper statement is more likely to remind you to look or at least scan the statement.

Go Paperless

You could go paperless and keep only scanned copies of your documents. The challenge with going paperless is that file maintenance may seem unimportant since it's so easy to store more and more files in the cloud. But keep in mind that cloud storage costs you money, needs to be secure, and unnecessary files waste energy. For more on the real energy cost of cloud storage read The Surprisingly Large Energy Footprint of the Digital Economy.

If you want to go paperless check out DocumentSnap. Brooks Duncan and his website DocumentSnap.com is my resource when I'm looking for more information on all things paperless.

* Wondering how long to keep papers?

Build your Paper Retention Guidelines with this Keep or Toss worksheet.

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Resource Roundup:

• How long should I keep records?

• Pendaflex - 2" Capacity Reinforced Hanging File Folders. Flat bottom. Available from Amazon

• How long should I keep this?

• The Surprisingly Large Energy Footprint of the Digital Economy

• DocumentSnap

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