GET ORGANIZED: Three Easy Tasks to Start the New Year

If your accountant or attorney asked you for an important document, such as a receipt for a property tax payment, where would you look first?

Most of our clients have the same answer: I’ll check in THE DRAWER.

It seems we all have one drawer in our homes that holds all the important documents. They certainly do not all belong in that drawer, but it is not clear where else to put them. Over time, the stack of paper can grow unwieldy with a mix of important documents that we need to keep, and other reports that we could probably throw away.

There is a better way. Try these three tasks this year.

#1: Clear the clutter: Trash unnecessary documents.

Don’t hold on to your old brokerage statements. Most custodians offer electronic retrieval of confirmations and statements, so warehousing monthly information is unnecessary and a lot of extra paper in your house.

Be sure to shred documents with personal information, especially ones containing account numbers or other sensitive data.

Buy a shredder for your home for $50-$100 or outsource the shredding. Companies like Office Depot or FedEx typically charge $1/pound for this service.

In the future, keep a document organizer titled “SHRED” in a convenient location. As you receive confidential financial information in the mail, if it is not necessary to save, put it in the organizer. Shred it when full.

#2: File important documents: Keep them accessible.

For example, life insurance statements, which identify the cash value of your policy, should be kept where you can find them.

One easy way to organize this information is in a 3-ring binder. Mark the binder’s front and spine with a summary of contents. Keep the contents neat using clear sheet protectors.

How you organize these files depends on the complexity of your life. You might have a separate file for these categories:

  • Health
  • Home
  • Finances

Keep a different binder for each category, and store them in a private location, preferably in a locked file cabinet in your home office. You should also let the executor of your estate know where you keep this information.

#3: Get ready for taxes: Create a file for receipts.

Set aside a file for tax information, such as acknowledgements of charitable gifts. Keep it where you open your mail so the documents your accountant will need early in the year will be easy to find.

Here is a partial list of documents to keep in this file:

Taxes:

  • IRS communication
  • Year-end Form 1099 and K-1s
  • Photocopy of checks for estimated taxes paid

Charity:

  • Receipts for charitable cash gifts and documentation for gifts in kind
  • Travel receipts for charitable work or board service

Investments:

  • Receipts for capital paid into or received from private funds
  • Summary of realized gains and losses
  • Documentation for securities litigation or class action lawsuits

Home:

  • Property tax receipts
  • Documentation of energy-efficient home improvements

Gifts:

  • Documentation of gifts subject to gift tax or within annual exclusion limits

Retirement:

  • Contributions or withdrawals from IRA or 401k plans
  • Receipts for legal work or estate planning completed
  • Annual statements for life insurance or long-term care insurance policies
  • Annual statement from the Social Security Administration or pension plans

Your tax accountant and your financial planner will thank you!