Paperwork is a big cause of clutter for most of us, and the best way to keep it under control is to have an effective filing system. Knowing what to keep and where to keep it makes the task of sorting paper so much easier. Setting up a filing system is pretty straightforward, but here are a few tips to make it totally functional for you.
1. Know how long to keep things – Most experts agree that 80% of the papers we file are never looked at again, so be ruthless about what you toss. Before you file something, ask yourself if you are likely to reference it or if you can access the information online. There are some papers that need to be kept, but most can be discarded after a short period of time. Here is a reference sheet with general recommendations for how long to hold on to things, but everyone's situation is different. To be safe, consult your tax preparer.
There are only a few items that need to be kept forever: legal documents like birth and death certificates; military records; deeds; titles; and divorce papers. These are difficult to replace, so they should be kept protected in a fireproof box or safety deposit box, not in your standard file cabinet.
2. Create 12 monthly folders for short-term files – The best method I’ve found for keeping receipts, statements, bills, and anything else that might be needed in the short term is to use twelve file folders labeled by the months of the year. Each month, as I make purchases, receive statements, and pay bills, I put the receipts in the folder for the current month. There they stay, until that same month next year, when I clear out the old and start adding the new. This ensures I hang on to this paperwork for a year (but only a year) in case I need to return something or check a statement. And clearing out that one single folder each month only takes a minute or two.
3. Use a 2-level system for the rest – For reference files and paperwork that needs to be kept long-term, I use a 2-level system. This can be set up with inexpensive hanging files and manila folders. Use the plastic tabs that come with the hanging files for the top level of labels, and limit them to just 5-10 broad categories. These are your big-picture sections, like HOME, FINANCE, HEALTH, WORK, and PERSONAL. Label these clearly with block letters so they stand out in your drawer. Keep in mind your categories are dictated by the paperwork you keep; not everyone will have the same needs.
The manila folders are then set up for all your individual files, and placed behind the appropriate category tab. For example, the FINANCE section might contain separate folders for each of your bank accounts, retirement accounts, mortgage, and insurance policies. Using a combination of hanging files and manila folders allows you to easily remove folders and put them back in their appropriate place. It also lets your system expand and contract as your needs change.
4. Try straight-line filing – Manila folders are typically sold in 3-tab styles, so a single box contains a combination of left, middle, and right tabs. The theory behind these is that they allow you to view three tabs at once. Personally, I find scanning across the 3 positions less efficient than just looking down one single line of tabs, so I arrange all my folders using just the left position. This also makes your file drawer look much less chaotic! In order to make full use of the folders, I simply take the right positioned ones and flip them inside out to make them match the left ones. The central position tabs get used for a specific section of the cabinet.
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