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Having trouble with papers? Create an effective filing system now!

By Ruth Racey
Published: Saturday, October 31st, 2009

A good way of fixing your credit history and minimizing debts is learning how to effectively manage files and constantly keeping track of financial records. Creating a file system does not only clean up your house; it also makes you more familiar with most of your files and documents, so by the time you need one, you will not lose precious time sorting through endless stacks of papers looking for it. 

Alphabetization is perhaps one of the easiest ways in making an effective filing system, but you can also provide several subjects or categories of your choice. Experts recommend an average of a dozen categories, which would be enough to label your files effectively. Some sample file categories are the following: 

  • Banking records (checking and savings accounts)
  • Paid bills (regular monthly bills)
  • Budget (listings of all expenses, assets and income)
  • Credit cards (receipts, contracts and statements)
  • Insurance (health, auto, life, house and other insurance records)
  • Investments (such as mutual fund reports)
  • Mortgage
  • Taxes
  • Receipts

Once done, you might be unsure how long you should keep those financial documents. For tax purposes, keep old records for seven years because that is how long the IRS can dig in if it wishes to audit you. You must also indefinitely keep hold of stocks and mutual fund statements because, if in case you will sell them later, you can show IRS the cost basis of your investments.

Keeping your filing system working

Now that you have created a filing system, the last, but most important step is for you to keep your paperwork in control. You do not want them to stay out of hand again just like before. Experts say you must create a paper-flow system that would instantly take care of incoming mails so it will not crowd your current files. Once you are done arranging and maintaining, pick out those records which are unnecessary to file, thus, reducing the stack of documents. You would be also clearer and more familiar with your finances, and of course better organized. Having a controlled filing system would also enable you to review the documents every day, avoiding last-minute instances where you search a morass of papers for hours – if not days – for just one document you need. Keeping an orderly compilation of your files would also give you a sense of pride when presenting it to accountants or paid tax professionals. Having them see a neat and well-organized file of documents and records.

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