E-file, alphabetize, toss it: tips for filing financial papers(Read article summary)
Filing financial documents can be a pain. But if you take the time to do it properly, you'll thank yourself.
Photo illustration/Alan Marsh / Design Pics/Newscom
Since our third child was born, I’ve found that it’s been more and more difficult to find time for some of the more routine and mundane personal finance tasks. For me, tops on that list of “mundane personal finance tasks I can postpone because there are three kids who each need some Dad time” is filing away papers.
Over the past few months, papers of all kinds – bills, statements, receipts, documents, and other things – have just slowly accumulated in the two inboxes I keep in my office (one strictly for filing and one for all kinds of things). As the pile got larger, it became ever so much easier to just worry about it later.
This past weekend, I finally faced the giant pile of papers and took on the large task of filing things. Here are some of the things that I learned.
An orderly electronic filing system is worth the startup cost. A scanner with an automatic document feeder might be a notable expense, but it’s honestly a similar expense to a high-quality filing cabinet. The advantage is that such a scanner makes it very easy to transition to an electronic filing system, where you simply drop documents into the scanner, have each page saved as a document on your computer, and then you name and identify each file appropriately and save it in the right folder on your computer (obviously, this goes hand in hand with backing up your data with great regularity).
Quite simply, this takes up far less space than a filing cabinet. You can just scan the documents you wish to scan, then shred them. Only the most vital of documents need to be retained in their original form.
If you’re scanning with a high-quality system, all of the documents are searchable on the computer, which means you can just search your entire stored document folder for, say, “Target,” and get a list of all documents that contain that word. This makes actually using the stuff you’ve filed much easier than before.
I use a “everything alphabetical by whatever letter makes sense” filing system. Seriously.
When a set of documents makes sense together, I just name that folder in the way that makes the most sense to me, then I just alphabetize all of those folders. Then, when I get a document, I can usually figure out where it goes within a guess or two, and finding that folder I’m looking for is usually very easy.
I’ve tried a “standardized” system in the past, but it always required me to remember names for specific things to find them. Frankly, I don’t look at the stuff I have filed every day – or every month, for that matter. Having to remember specific names or patterns to make the filing work is a mistake because I’m simply never going to remember it for my purposes. It might work for an office environment where you use the filing system many times every day, but for me, it’s just not worth it.
If you’re starting from scratch, a large body of documents makes it easier than just a few. It is incredibly easy to overlook some set of documents or records that you wish to retain if you start with just a few documents. In fact, a later influx of unexpected items can make it easy for you to just throw out your filing system entirely and start over from scratch.
Don’t get me wrong – a large mountain of documents to file can seem intimidating. However, they also give you the advantage of getting your system right. Spread out, make piles that make sense to you, and file them away in a way where it’ll be easy to know immediately, when you receive something new, where it will go.
If it’s old or unimportant, don’t be afraid to toss it. I don’t keep any non-essential documents more than seven years old in paper form. I do keep old stuff in electronic form, but that’s because hard drive space is increasing at a far faster rate than my document archives are and it’s easy to just stick documents I don’t want to look at in another folder where I don’t have to be bothered. Electronic documents don’t take up physical space after all.
Old documents take up space with no real purpose. Unless it’s a birth certificate or a Social Security card or something similar, don’t waste space in your home keeping it more than a decade.
Know why you’re keeping stuff. I like to keep old energy bills so I can track our energy usage over time as we change things. It’s really hard to tell a difference with small things, but as we do bigger things (particularly those related to heating and cooling), I can see a year-over-year difference.
However, I don’t keep things like cell phone bills from previous cell contracts. I might keep the last one just to verify that the contract is cancelled and the plan is resolved, but why keep the other statements? There’s virtually no positive reason to have a cell phone bill from two years ago from a different provider than the one you have now.
It took me six hours to file everything in a way I was happy with, but the end result was a much cleaner office and a sense of a necessary job completed well. I call that a win.
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