Papers, papers everywhere! Paperwork, paying bills, and keeping records is a part of life but it really gets challenging to know what to keep, where to keep it, and for how long, doesn’t it?
Oh, keeping current papers for the current year is kind of a no-brainer. (If you missed my post on how to organize your current year’s financial papers, click here or grab the link at the bottom of this post.) But what about all those papers from years past? What do you do with them? Where do you keep them? How long do you keep them?
Well, this can be a complicated question. You see, there are many different categories of paperwork that you should keep records of:
- Tax Return Paperwork
- Paperwork related to property purchases
- Monthly bills and statements
- Medical Paperwork
And to make things even more complicated, there are different rules for each type of paperwork! Since the goal here is not to confuse you, but to give you a simple strategy for dealing with all that paperwork, let’s break it down piece by piece:
Tax Return Paperwork
The general rule here is that you need to keep at least the past 7 years of your tax return paperwork. Now, this does not mean every receipt and bank statement from the entire year, but it does include your completed tax forms as well as the essential accompanying paperwork. For example, your W-2s, 1099 forms, donation contribution statements, etc. Some people say that you should keep every tax return that you have ever turned in and if you want to, by all means, do it! But the minimum amount you should keep is 7 years.
Where do you keep them?
Tax return papers from years past is not something that many people pull out for a little light reading when they have nothing to do on a rainy afternoon! These papers can go into long term storage – wherever long term storage may be for you. It could be your attic or your basement, your garage or that back closet.
Personally, I like to keep my tax return paperwork separate from the rest of our paperwork. Now, this could mean different things depending on how you store your papers. It could mean purchasing a large pendaflex file and giving each year of tax returns its own tab. It could mean putting the paperwork in a folder, labeling the folder with the year and placing it in a plastic file box. It could mean labeling a file folder and placing it in a filing cabinet if you have one for that purpose.
No matter where you place your files, make sure that all your tax return paperwork (from all 7 years) is together and clearly labeled in case you need to reference it in the future.
Paperwork Related to Property Purchased
You should always keep all paperwork related to property purchases. For example, if you purchase a house, you should keep all the closing papers, the mortgage paperwork, and any titles of the property that come with the closing purchase agreement paperwork. (Just a side note: The monthly payment statements that you receive fall under the ‘Monthly Bills and Statements’ category.)
This also applies to any vehicles or large purchases (boats, motorcycles, dirt bikes, and more). Even if you completely paid off your home or vehicle, you need to keep the paperwork, the title papers, and the signed purchase agreement.
The length of time that you keep this paperwork will vary for each large purchase. As long as you own the property, you need to maintain the paperwork for it. However, if you sell it, you are required to keep the paperwork through filing taxes for the year that you sold it.
Let me see if I can explain this one a bit better. Say you purchased a car in 2012. You would keep all the paperwork (the final purchase agreement, the title of the car) in your files starting the day that you purchased the car in 2012. In June of 2019, you decide to sell the car. The sale is successful and you have all the closing paperwork that shows the completion of the sale of the car. You need to keep all the purchase and selling paperwork on that car until you file your 2019 taxes and receive conformation that the IRS has received your tax paperwork. Only then can you safely get rid of all the paperwork that you have on that vehicle.
Where do you keep them?
These papers, like the tax documents, should be kept long-term. If fact, if you have room in your file box or filing cabinet next to your tax returns, that would be a great place to keep them. If you have no room or if all of the papers are legal size as opposed to letter size, you might need another box next to your tax return documents.
If these papers are not already in a folder, I highly recommend that you place them in a folder that is clearly labeled. That way if you need to find something, you won’t be searching for hours!
If you own your property outright (be it a car, house, motorcycle, or something else), I highly recommend placing the 1-page title document in a safe (if you have one). This is the single most important piece of paper that proves that the property you purchased is, in fact, yours. If you do not have a safe, consider keeping the titles of your property together in a safe and accessible place.
Monthly Bills and Statements
When it comes to keeping your monthly bills and statements, the pile can seem humungous! The general rule is that you want to keep records of your monthly bills and statements for 3 to 4 years. Now, this can seem very intimidating at first, but keep in mind that all of these papers do not need to be kept easily accessible for 3-4 years! The monthly papers that you want to keep most accessible are your current year’s financial records.
Where do you keep them?
So, where do you keep all these records of years past? These records also go into long-term storage, whether that is a plastic file box, a cardboard bankers box, or a filing cabinet. You can place them in a long-term storage spot right along with those tax papers and property paperwork. In fact, I do recommend that you keep all of your paperwork close together in your long term storage so that you do not have to hunt all over for it if you need to access it for any reason.
How to sort and store the paperwork seems to be the key question here. First of all, start by sorting the paperwork by year. Once you have the paperwork sorted out by year, you can simply focus on the piles from the past 4 years. You can take all the previous paperwork and put it in a box to get rid of (see below for how to get rid of financial paperwork). Doesn’t that feel good to get rid of so much already?
Now, take one year at a time and sort you papers into vendor piles. For example, all the Visa bills go in one pile, all the electricity bills go in another pile, all the mortgage payment bills go in another pile, etc. You might want to choose a large table top or an open floor space to sort through all these different papers.
Once you have the papers sorted into piles, it is time to put each pile into its own folder. I recommend labeling the folder starting with the year, then the category. For example: “2018 Electricity Bills.” As you label each folder and put the correct papers in it, place your folder in your long-term storage bin, whether that be a box or a filing cabinet.
When you break it down step by step, a complicated, intimidating mound of papers becomes much easier to understand and manage. And that, my Friend, is just what you did. Congratulations!
One final note: If you feel so inclined to organize the papers within each folder by date, go right ahead. However, it is not necessary. Also, if you want to use colored folders so that you can find what you’re looking for even faster, enjoy using colors! Just know that manilla folders work just as well as the colored ones do. (Although, I will freely admit, I’m very partial to the colors!)
Medical paperwork can get tricky. There are many different aspects to medical paperwork, so we are only going to focus on the financial aspect of medical paperwork today.
If you have medical bills that you are currently paying off, you need to keep all the paperwork related to the bill and the statements until you have completed paying off that bill. Once the bill is paid off, you can throw away most of the billing paperwork, however I would recommend keeping the final statement that shows that your bill has been paid in full.
Where do you keep them?
Once your bill has been paid in full and your tax return for the year that it was paid off has been filed, these records can also go into long term storage. I recommend making a folder that holds just the information for medical bills and keeping it with the rest of your financial information.
What to do with the excess paperwork
Now that you’ve gone through your files and pulled out what you do not need to keep, what do you do with all this paper? The big thing to remember about all this paperwork is that it has your information on it – account numbers, address, credit card numbers, debit card numbers, bank account information. Since this is information that you want to keep private, you want to be sure to shred or burn all of this excess paperwork. Never simply throw it in a bag and take it out to the trash!
Progress, not Perfection
We’ve covered a lot of ground today, haven’t we? One thing that I want you to remember is that this does not need to be done all in one day! You have spent many years collecting this paperwork and it is very difficult to get through it all in an afternoon! Break it down and take it one step at a time.
Remember, it’s all about the progress, not perfection!
You’ve got this, my Friend! It may seem complicated and intimidating at first, but take it one step at a time and before you know it, you will arrive at your destination. It’s all about deciding to take that very first step.
And if you need a little extra encouragement or need to brainstorm with someone, come find me on social media or drop me an email. I’d love to chat with you and encourage you!
- How to Organize Your Financial Papers
- How to Deal with Piles of Paper in Your Space
- How To Organize Your Desk and Why It Matters
- 5 Simple Steps to Take You from Scattered to Organized
Elizabeth Tatham, founder of Inspiration in the Everyday, is a homeschooling momma of 5 who loves helping other homeschooling mommas create a unique homeschooling adventure your kids will love…without the overwhelm! Join in on the journey with 7 simple steps to make your homeschooling day go faster, easier, and with less tears here.