February is the perfect time to review your file system—or lack of one. I love to file my taxes before the end of February, which means gathering a lot of documents and tracking them. If you want to get taxes behind you as quickly as possible, having a solid and simple filing system, both paper is essential.
While you are gathering financial documents, you will also be coming across other papers and computer files that you want to save and be able to locate easily. It makes sense to review or create a complete system, not just financial files.
Begin by gathering every bit of paper that is currently homeless. Get bits out of the car, the nightstand, the kitchen table, the in-box, your desk, etc. Sort first into keep, toss, shred and recycle.
Once you’ve done the simple sort, further categorize the “keep” papers into some fairly broad categories. Where I usually see people fail in creating and maintaining a file system is in making the categories too specific. Make a file for “Utilities,” not one each for Garbage, Electric, Propane, Water, etc. unless you have a really good reason one or more of those needs its own file.
I do like to give each bank account its own file, but more on this later.
You don’t have to have your supplies yet, just use sticky notes and binder clips to label and gather the piles. If you are simply reviewing your system, you will file into existing folders with some adjustments and additions. If you are creating a system from scratch, fetch or purchase the appropriate amount of manila and hanging folders a labeler (loaded with tape and batteries).
The hanging folders can usually hold three to five manila folders. Label the hanging folder tab with the broad category (Financial, Home, Insurance, etc.) and put as many of the manila folders in each as will fit. Place the tab all the way to the left, don’t stagger them, it just adds work. You will probably need more than one Financial hanging folder and more than one Health folder—just go by volume.
For the hanging folders, such as Financial, you might have a second tab indicating the sub-category, which would be inserted in the middle of the folder’s edge for something like “Banking”. Other Financial hanging folders might have second tabs for “Investments” or “Receipts”.
The manila folders will be organized alphabetically within the hanging files. Under “Financial, Banking” you might have Bank of America, Chase, Mechanics Bank.. Under “Health, Medical”, you might have doctors in each folder, organized by last names or by the type of doctor (Dentist, Gynecologist, Podiatrist, etc).
You will figure out what kind of storage you need for your files once you have them made. For now, hang the files in cheap banker’s boxes. Some people end up needing a small plastic file box with a handle, while others need two or more entire filing cabinets.. Don’t skimp on space—get something that gives you a little room to grow and plenty of room to scan through your files and add to them effortlessly.
Miscellaneous is always a handy file to have in any category. I have one for random letters and cards (under “Letters, Misc”), for poetry and fiction I tear out of magazines (under “Writing, Misc”), for travel that doesn’t really fit into one country or another’s files (under “Travel, US, Misc”, for example). I hate abbreviating file labels, but in this case, “Miscellaneous” is such a long word that it makes since to cut it down and save on the label tape.
Gather any tax documents you need in a folder and leave it clearly labeled and somewhere in view, such as in a graduated file holder (available at Staples) on your desk. Make another folder for any items that need action or attention and label that “Action,” or “To Do” somewhere where you might do some of the tasks, like near your computer or in your briefcase or a tote with your phone.
Never file papers that have loose ends attached that need some action. Anything filed in a file cabinet should be simply reference or archives and should be thoroughly purged annually.