Organize your money life

We recommend you create a system for filing your paid bills and important documents.

Creating a system for your financial papers

Here are the basics. Create two sets of files:

• A "Current Year File" for bills or active files,

• A "Permanent File" for long-term storage of important inactive records.

Current year file

These files are organized within the year. They will contain the information necessary to do you taxes or fill out your accountant's tax planner.

Every January, clear out these records and keep last year's records in a banker's box for tax preparation. Once your taxes are filed, put a copy of your return in the box and store it.

The IRS has three years to raise routine questions and six years if it thinks you "substantially" underreported income. In cases of fraud, there is no time limitation. I recommend that you keep records for at least seven years.

Create these file categories:

Autos: Keep a file for each vehicle

• Receipts for service and repair
• Traffic and parking Tickets

Bank Accounts: Keep a file for each account

• Statements

Charitable Contribution Receipts

• Cash and non-cash contribution receipts

Credit Cards: Keep a file for each account

Employment

• Paycheck Stubs
• Unemployment compensation
• W-2s

Expenses: Keep separate files for

• Employment and Business related expenses
• Miscellaneous deductible expenses (Advisory Fees for Accountants, Financial Advisors, Investment Managers, Lawyers),
• Home office expenses,
• Safe deposit box fees,
• Subscriptions related to producing income)

Investments

This file is necessary for taxes. I recommend that you do not put last year's statements in deep storage, but create a separate chronological file or binder per account for these statements and confirmations. If you are invested in the stock or bond market, you need to figure out your cost basis for non-retirement investment you sell. This file will contain the purchase price and a record of dividends paid and previous withdrawals. This little understood concept of cost basis makes the IRS millions, because many investors don't take the deduction they deserve.

Medical Bills

• Check stubs for payments
• Copies of filed claims
• Premium payment receipts or cancelled checks
• Record of travel expenses

Real Estate

• Mortgage Receipts
• Receipts for all improvements
• Tax notices

Rental Property

• Record of security deposits
• Advertisement receipts
• All receipts and records related to this business

Retirement Savings

• Statements (these are filed with other investments at the end of the year.)

Schools and Childcare

• Receipts for childcare
• Receipts for tuition, books and fees.

Self Employment

If your self-employment business is extensive, create a separate system for those files. If it's simple keep records here.

• Business Bank and Credit Cards
• Expenses
• Sales and Income records
• Social Security
• Records of Income received

Taxes

• Cancelled Checks for taxes paid
• Copies of estimated tax payments
• Any correspondence
• Alimony Payments or receipts
• Gambling Income
• Prizes and Awards

Permanent File

This file is for long-term accessibility of items you occasionally need to reference. This file includes policies, warranties, titles etc. (Use a safe or safe-deposit box for valuable files such as titles and bond certificates).

Auto's: One file for each vehicle, keep for life of the auto

• Titles or loan documents
• Warranty
• Recall information
• Copy of registration
• Insurance Policy
• Accident Records
• Repair receipts
• Fuel receipts if you are able to deduct any use of your car. (Note: if you are deducting use of your car the IRS also requires written documentation of beginning and ending odometer and business purpose of every trip you deduct. Keep a little mileage book in your car.)

Employment

• Benefits Book
• Employee Handbook
• Resume
• Papers regarding stock options, retirement plans, profit-sharing.

Health Insurance

• Policy contracts
• Premium payment receipts
• Current list of medications

Investments

• Annuity Policies
• Bond Certificates

Life Insurance

• Policies
• Policy loans and proceeds
• Death Certificate

Legal proceedings

Loan Documents

Personal

• Adoption or Naturalization Papers
• Certificates for birth, marriage, divorce, separation
• Court Orders
• Diplomas
• Military Discharge Papers
• Passports
• Awards
• Miscellaneous personal papers

Residence

• Title, Deeds and Title Insurance
• Mortgage papers
• Homeowners or Renters Insurance Policy and addendums
• Appraisals
• Claims
• Photo's of Home and Personal Property (best held outside the home)

Social Security

• Numbers for every family member
• Personal Earning History
• Correspondence

Warranties

• Any purchase receipts you feel you may need
• Maintenance Contracts
• Maintenance Records
• Owners Manuals

Wills and Trusts

• Copies of wills and trusts. (Keep the original in a safe place. It's a wonderful help to you executor to give them a copy too.)
• Correspondence
• Documentation of significant gifts
• Trust tax returns

Barbara Bachelder, CFP® for Wealth by Design, LLC