During this month, I would like to remind you how important and helpful it would be if you start with a clean slate in your filing cabinet and with your tax documents. Yes, April 15th, is a long way away from January but I’d like you to consider wading through the paper and files now while the snow is falling and it’s freezing out. Come spring, you will want to be outside doing better, more fun things with your time. Why not tackle your office or filing cabinet now?
Hopefully by now, you are starting to shift towards paperless bills, automatic bill payments, and e-statements. If you haven’t tackled one of those yet, I’d encourage you to make it a priority this year. It saves you a lot of bill paying time, you will never be late on a payment and you can always view the statement when it comes in the mail or via email so you stay in touch with your spending. If you do go ahead and set up paperless statements and bills, create a folder in your email inbox just for paid bills or financial statements. As these emails come through drag them into that folder. That’s one step versus four steps if you get a bill in the mail that you have to pay. I do the same thing for online purchases. Create a receipts folder and place all receipts from online shopping inside it.
If you are still collecting papers and your files are outdated, I’d like to suggest a few of the following tips for helping you catch up with paper. Over the years I find these are the repetitive suggestions I bring up with most clients.
- Keep only seven years (if not less) worth of tax papers. I know several of you have the tax return packets but the majority of you have the rest of the tax year paperwork strewn about or mixed up. Only keep paperwork that supported your tax return as income or a deductible expense. And keep this paperwork by year with the tax return so you can easily pitch old years, as new years pass.
- Toss old policies whether it’s insurance or 401k policies that you’ve rolled over. The time period is over. Move on.
- There’s no deduction for medical bills unless you paid them through an HSA or FSA account OR had a major medical catastrophe that took a large portion of your income. So ditch the Explanation of Benefit statements and bills that weren’t paid out of a special medical deductible account.
- Shred monthly financial statements from investment accounts. You will get a year end recap and statement to use for taxes. The individual monthly statements are a waste of paper and space. If you’re really curious or nervous, log in online instead and look at your investment levels.
- Stop saving utility bills, phone bills, and lawn maintenance bills, etc. None of these regular household expenses are tax deductible unless you run a business from home. Keep one set of all your monthly expenses and go paperless. You’ll have your accounts and phone numbers with that one set in the drawer in case you need to look something up quickly.
- And no, I don’t recommend keeping your old checkbooks that are used up. You have bank statements and online banking to refer back to checks.