Taking care of your family finances is like having your own business: You need to have a simple system in place and then follow it to make sure everything runs smoothly. Fortunately, all it takes is a bit of organization and the commitment to stay on top of it. The rewards are enormous―you won't be drowning in a sea of papers each month, and you'll save yourself a lot of stress.
STEP 1: Sort through your papers
Deal with the bills, statements, receipts and other notices that stream in by learning what to keep―and for how long.
You don't need to keep every piece of paper for posterity. Know what to file away and what to shred―and when. To begin, gather all the papers piling up on your kitchen table, in your purse and in assorted drawers and separate them into the following four categories:
1. Hold for ONE MONTH
Keep these papers, and at the end of each month check them against your monthly statements. Then it's OK to toss them.
• All receipts for everyday purchases (except those saved for tax purposes)
• ATM and bank slips
• Credit card receipts
2. Hold for ONE YEAR
Arrange the papers in separate files labeled income, expenses, home, investments, etc. Toss them when you get your annual statements or W-2 tax forms (1099 if you're self-employed).
• Paycheck stubs
• Monthly bank statements
• Mortgage bills
• Phone and utility bills
• Processed checks
• Investment quarterly reports
• Medical bills
3. Hold for SEVEN YEARS
The IRS can audit you going back seven years, so these records could come in handy.
• All tax-related records and receipts, plus a copy of the actual return
• Annual credit card statements
• Checks and receipts for business deductions
• Retirement account contributions
• Charitable donations
• Child-care bills and medical expenses
• Mortgage interest and property tax payments
4. Hold FOREVER
Hang on to these papers indefinitely, or until you sell the item purchased or stop using the service.
• Medical info (copies of insurance cards, doctors' numbers, prescriptions, surgery records, health-care power of attorney and other information)
• Past tax returns
• Insurance policies
• Investment purchase and beneficiary records
• Wills and records on beneficiaries and trusts
• Home deed
• IRA nondeductible contributions (to prove you paid tax on the money)
• Loan agreements, stock-purchase agreements, pension-plan and retirement-plan documents
• Receipts and warranties for big purchases (anything that would cost more than your insurance deductible to replace)
• Credit card agreements
• Brokerage annual statement
• Automobile papers
• Home improvements (for buyers)
• Birth, death and marriage certificates; passports; social security cards; college transcripts and diplomas; divorce decrees; adoption and child-custody papers; prenuptial agreements
• An inventory of every valuable item in your home (update this as necessary)
Avoid identity theft: Don't just throw away papers that contain personal information; instead, pass them through a paper shredder (available at any office-supply store; prices start at about $25).
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