How to Organize Paperwork for Your Finances
Before you know it, tax season is going to be here again.
But, even though it’s still a way’s away, you’re worried because your desk looks like a war zone and you have financial papers scattered everywhere.
You have no idea how to pull together the necessary financial documents, so you just keep putting it off and putting it off.
This is not the way to go about organizing your finances.
If your financial papers are a mess, you’ve come to the right place.
Check out this guide to learn how to organize paperwork for your finances.
Table of Contents
1. Know What You Need
First things first, you need to know what you need and know what can be thrown away.
Although you may think it’s a good idea to keep everything in the event of an audit, you simply can’t keep everything. Otherwise, you’ll be buried in paperwork and you’ll never get anywhere.
Here’s what you should keep:
- Keep for one year: You should hold onto your pay stubs, pay stub templates, paid bills, investment statements, and bank records for one year. Unless you need these documents for business purposes, shred them after the year is over
- Keep for 3 years: You should hang on to charitable gift receipts, tax returns, mutual fund receipts, and other supporting documents for up to three years.
- Keep for 7 years: For seven years, you should hang onto any documents related to bad debt deduction or anything related to a loss claim. Also, if you rely on cash tips, hang onto your records for 7 years unless you report 25 percent of your gross income
If you have documents that don’t fit into these categories, it’s time to toss them out and shred them.
2. Make Folders
Now that you have the necessary documents in hand, it’s time to grab three folders and give each of them a label. Label one as “now”, one as “10 minutes a week”, and one as “file”.
The ‘now’ folder should include license renewals, insurance information, registrations, and bills you need to pay. Once a week, you need to go through these folders.
In your ’10 minute a week’ folder, you should include paperwork that you couldn’t complete on your own as well as subscription renewals. You should sort through this stuff for 10 minutes each week so that it doesn’t pile up.
Lastly, you’ll have your ‘file’ folder, which should include everything you’ll need for the future.
3. Sort Tax Documents into Sub-Folders
Lastly, you want to take the time to organize your tax documents in three sub-folder.
These folders should be organized by year and should be divided into investments, expenses/deductions, and income.
It can also help to organize your bills in alphabetical order. For example, rather than sorting through a pile of bills labeled “utilities”, you can search under the company name.
How to Organize Paperwork: Are You Ready to Get Organized?
Now that you know how to organize paperwork for your finances, it’s time to get started.
While organizing your paperwork can take a while, you’ll feel much better when it’s all done.
And, be sure to check back in with our blog for more financial tips and tricks.