29 April 2013

Manage your money just enough: create a simple filing system for your tax records

Manage Your Money Just Enough

Photo credit: FreeDigitalPhotos.net

When I put out a request for your financial organization tips, it was the day after Tax Day. At the time, I was heaving a heavy sigh of relief that a dreaded task (doing my taxes) was OVER and I could look forward to a new, organized fiscal year.

As your tips started coming in, I was struck by the realization that I was making the job of organizing my financial records much harder than it needed to be. I had worked myself into a tizzy over tracking expenses and receipts, and having a fullproof filing system...when the day-to-day can be so much simpler than that.

With filing and recordkeeping, the key is to just start

When it comes to a simple filing system, a theme emerged: having a system in place -- any system -- lets you handle paper and information as soon as it comes in.

Tracking expenses, filing papers and receipts, and other recordkeeping chores takes minutes per day. But the time you save at tax time (or anytime you need to pull together your financial picture, say, if you decide to refinance your mortgage) when your stuff's all in one place...well, let's just say it's significant.

I had fallen into the trap of fretting over the "perfect" system while the records piled up. The backlog then created its own stress. (As you can see, despite my Minimalist Parenting progress, I still fall back into my over-analyzing ways.)

At Amazon: Cavallini File Folders (Vintage Owls), Set of 12
At Amazon: Cavallini File Folders (Vintage Owls), Set of 12

Low-tech filing systems

According to the tips I've received, it's as simple as deciding on a place to put all the paper, even if you're not sure it's necessary or applicable.

Amberlynn (who has been submitting hacks for YEARS) uses the simplest single-folder system:

There's a file folder in our important papers box labeled "Taxes 2013." If we think something will be evidence we need that doesn't already have a designated spot, it goes in there.

When it's tax time, the folder comes out. If it's in there and we use it, good. If not - no biggie: we just shred it. (Paper shreds help out the compost which is appreciated during planting season, so double help there.)

Lisa shared a similar tip, but she keeps her "Taxes" file in her bill-paying station so its easily accessible.

Kristi prints tax-related email and stashes it in her "Taxes" file. She added:

If there's even a remote possibility that we need a record for taxes, it goes in that folder. It's also helpful once the deluge of W2s and 1099s and such start in January, because there's already a place for it all to go. 

Virginia makes the whole process more pleasant by making it beautiful:

I buy really cute file folders (Cavallini file folders are my favorite) and put them in a nice looking file folder box at my desk by the kitchen. Things get filed right away for a calendar year in my box. In January, they get archived.

Electronic filing systems: scanning documents and labeling email

Those of us using online bill pay and donating to charities via PayPal don't have a lot of paper sitting around (nor do we want it). But that doesn't let us off the hook for recordkeeping.

Lisa uses her email's labeling feature to organize her electronic records:

I set up labels in Gmail (TAXES, CHARITY, etc.), then tag and archive everything related to taxes like receipts for donations, payments, etc.

Sarra scans then shreds the few paper bills she receives:

I don't keep a lot of documents.  I have a bin where I process the mail that's labeled "to scan."

When I go to scan it, it gets a second look to see if I really need to keep it.  I go paperless so I don't get much mail to begin with.  I keep investment statements and anything that I can't readily get online.

Bills once paid (if they aren't needed for taxes) get shredded.  I still end up with a lot more paper than I need, but I'm getting better.

The first several years of my marriage, I kept everything that came in the mail that seemed important.  Then I didn't look at it for several years. I had a big shredding party, and realized that I just don't need a lot of that stuff.  

As you can see, none of these filing systems are complicated. The key: just get started.

If you've got more thoughts, tips or suggestions about filing systems, please share them in the comments. I'm all ears.

This post is part of a series called Manage Your Money Just Enough. Click here to read the entire series.

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