Do you dread filing your bills, bank statements, and any other paperwork? I do, and I have yet to meet anyone who enjoys it. However, it is an important part of having a stress-free financial life and is one of the 7 Secrets to Financial Success. Here are five steps you can take now to set up a simple personal filing system.
Step 1: Begin at The Beginning of Year or Close to It
Having an established personal filing system for the entire year will make preparing your taxes easier. But you can start at any time during the year. In other words, if you are haven’t done it yet and it’s almost the end of the year, do it anyway.
Step 2: Decide Where You Will Keep Your Files
It can be a desk drawer, a filing cabinet, or a portable file box. This will also depend upon whether you have a separate space to pay your bills. Or if you share the desk with another family member. You might want to consider what is the most convenient space.
When choosing, keep in mind that vertical and not horizontal space works better. Meaning, piles of folders and paperwork make it much harder to locate. If it is vertical, as in a filing cabinet, you will be able locate paperwork more easily.
Step 3: Decide on The Actual Filing System
Make your personal filing system as simple as possible. It will save you time and you will be more willing to keep it up-to-date.
Here are a few ideas:
- If you have a simple life, i.e. a single person or couple without kids, set up a paid and unpaid folder. Print or make a note of any bills that are emailed or paperless. Move unpaid bills to the paid folder when they are paid. Make separate paid folders for tax deductible items such medical and charitable giving. I use a large envelope to keep my receipts.
- If you have a small consulting/service business, make a separate folder for your business expenses.
- If you have a more complicated life, i.e. married with kids, or a single parent with kids, follow the same for unpaid. Add extra folders for your children’s expenses, such a medical, since you may have specific health care deductibles.
- Need to make a phone call about your bill? Add a folder and call it disputed bills. Keep notes on when you called including to whom you spoke with and the potential resolution.
- At the end of the year, review the paid folders. Remove any duplicate information.
- Keep credit card receipts during the month in a folder. Match up the charges when you receive the bill. Only keep necessary receipts, i.e. expenses that may be tax deductible.
Step 4: Buy or Repurpose Supplies
First, check to see if you already have the supplies, such as folders, labels, extra room in a filing cabinet. Consider repurposing a drawer in a desk or filing cabinet. Reuse folders by turning them inside out. If you do not have neat handwriting, you may want to use a label maker to make your files neater.
Step 5: Decide on Landing Space and Frequency
We need to put your paperwork somewhere before it is opened, addressed, and filed. You may not want to open your mail every day. I find that opening my mail once a week saves me time.
As a suggestion, consider putting all unopened mail in a basket. Then once or twice a week on set days, open all of your mail and sort it as you go. Sort according to how you are filing, i.e. bills to be paid, phone calls to be made, papers to shred. The key is to decide what is the next action for each piece of paper.
We are at the beginning of a new year. Think about how much easier it will be to prepare your tax return next year if you start organizing now. Remember to make your personal filing system as simple as possible. It will be easy to maintain and kept up-to-date. Finally, change your system if it is not being kept up to date.
More ideas on organizing your personal filing system
What may work for some may not for you. Here are some articles that can help you figure out your own approach: