Getting Organized

Planning for your money future begins with planning today. It also includes planning for the unexpected.

We are not a paperless society.  Most families have junk drawers—the place where you throw all the warranties and miscellaneous documents that you will file “someday.”  From the time you were a little kid, you probably gathered stuff.  I bet you have a report card that is several decades old (I do)!  Hard to believe, but that’s good news.  Out of all that paper buried in drawers, boxes and bags are the makings for building your money file system. 

Getting organized means that you will know exactly where are your old tax returns, mortgage papers, loan applications and payoffs, credit reports, retirement accounts, any investment and bank accounts, car documents, various insurance policies, improvements to your home, warranties, even bills to be paid!  This is one of the major areas where a money cloud can shade a household.  It just seems like so much stuff to keep track of

It is.  But, you have to.  If you don’t, chaos continues to be your partner.  For you to complete our 30-day “get-our-act-together” program, you need to process through this step.  What you find will fill in the blanks in several other spots in this guide.  It’s the beginning of a true measurement of where you presently are and where you want to arrive. 

Your Action Plan 

You need a place to put the documents you are gathering.  Your stuff.  Ideally, a small filing cabinet can work wonders, especially when it is accompanied with real files. Manila ones are fine—you may even want to stretch and do a little color coding, either with labels or the actual file (try red for your Action-Problem To Do file).  If you don’t have a file (or don’t want to purchase one), a heavy duty cardboard box from the stationery store works well.  The point is to have a receptacle and a regular spot that you will unload your treasures and financial data to.  Here’s a starting point: 

Money $marts Quick File Method

Household Files:

            Appliances Info-Warranties

            Electronic Info-Warranties

            Garage and Outdoor Tools Info-Warranties

            Home Furnishings



Financial Files-Use One for Each Separate Item or Company:


            Bank Accounts

            Canceled Checks

            Credit Cards



            Home Improvements & Repairs

            Home Purchase & Sale




            Real Estate

            Retirement Plans

            Trusts, Wills & Estate Plans



Taxes—Federal & State:

            Current Year-Income

            Next Year-Income

            Previous Years (6)-Income

            Real Estate

Current Bills:

            Bills to be Paid

            Monthly Files for Bills Already Paid (12)

            Action-Problem To Do

Names, Phone #s and Addresses of All Advisors and Agents



            Financial Planner


            Family or Friend



Keep separate categories for all your appliance warranties, receipts and general information.  Most likely, you may not look at them until something goes wrong or you replace with a newer model.  If you own a home, most improvement expenses can be used to offset part of profits when you sell.   Use separate files for each credit card. 

Within your files, it usually makes sense to have envelopes to separate the various receipts— i.e., personal income tax deductions.  You can file receipts as you accumulate them and keep a total monthly (or yearly) total for your tax appointment with your accountant.  You need to access tax info anytime you apply for a loan of any sort. 

What to Toss

If you are like most people, you collect stuff.  The paper trail is no exception.  Here’s what to keep: 

1                    Investment Information—you need to know how much you paid for something, how much you sold it for and whether or not you got interest or dividends while you held them.  Brokerage firms and mutual fund companies send statements—keep them until you no longer need them and have reported the gain/loss to the IRS.  Backup data should be kept for six years with tax return.

2                    Retirement Account and Paycheck Records—current tax law requires you to keep Forms 1040, 8606, 1099R and 5498 for each year you made a contribution to your IRA.  Keep paycheck stubs until you get the W-2 you file with your tax return—toss those if it all the numbers in each category add up. 

3                    Insurance Polices—keep copies of all current insurance polices.  Once you cancel one, keep a copy for up to two years, then toss. 

4                    Medical Records—current tax law allows you to deduct anything over 7.5% of your AGI (adjusted gross income) on your federal tax return.  If your AGI is $40,000, you can deduct expenses in excess of $3,000, excluding medical insurance premiums.  If your medical expenses don’t exceed 7.5% for your AGI, toss the receipts. 

5                    Credit Card Receipts and Statements—when you receive your monthly statement and all matches up, you can toss the receipt.  The exception would be if there is a possibility of needing to replace or return the item or you are dealing with an erroneous charge, keep the receipt.  I use a mini-file each year that has monthly tabs and just put them in the monthly slot.  If I need to find the receipt, I’ve found that my memory gives me an estimate of when I bought the item (winter, summertime, etc.), and I can find it quickly. 

6                    Canceled Checks and Bank Statements—keep bank statements for at least six years (IRS may need copies if an audit surfaces).  Any ATM receipts should be matched to bank statement, then tossed. Canceled checks relating to home improvement should be kept to support improvements when sold; otherwise, they can be tossed after a year. 

7                    Household Bills and Receipts—food, utilities, etc. are expensive, but not deductible (if you have a home office, get tax advise—some expenses will be deductible).  If you pay for child care and education expenses, these amounts will be used on your tax return—so keep them.  If you have had a casualty loss related to fires, weather destruction, etc., you may be able to take a deduction.  Again, your tax advisor is the best source on what you can and cannot do. 

8                    Home Purchase/Sale and Improvements—presently, if you sell your home and are single, you get up to $250,000 in tax-free profits; $500,000 if married.  Whether you are over or under the tax free zone, it makes sense to hold on to anything that reflects a capital improvement (the new porch counts; the snazzy light bulbs don’t).  Keep your original buy and sell documents indefinitely. 

9                    Mortgage and Property Tax Records—when you file your taxes, you need the info supplied by the mortgage lender as well as property taxes to include under “itemized deductions.”  Under current law, you can deduct up to $1,100,000 in interest payments as long as the interest is only for up to two homes.  If you own a third one, no additional deduction, even if it’s under the $1,100,000 amount.  Keep this info for at least six years and as long as you own the house(s). 

10                Federal and State Income Tax Returns—under current law, you can be audited for up to 6 years by the IRS—so 6 years worth is the minimum.  If the IRS suspects fraud in any area, it can audit until the cows come home.  So, keep your returns and whatever backup supports them in a box for the “just in case.” 

Your Final Money $mart Tip

When you buy a new computer, it most likely comes with money tracking software—either Microsoft Money or Intuit’s Quicken.  If not already on your computer, purchase one of them.  They are fairly inexpensive and true godsends when it comes to gathering data for income tax purposes.    

Intuit also publishes Turbotax and Quickbooks—for taxes and general bookkeeping. Newest on the scene is Quickbooks Simple Start, an excellent tool for a small business and can literally be set up in seconds.  All programs are available for under $100 each.  Watch for rebate and discount coupons. 

Take advantage of Internet banking through your bank.   You can easily download your account information, including deposits and checks written directly to the software program you use.