Client Login  

Organize Your Important Records

The "Start Over" File Folder

If you keep your bills and bank statements stuffed in a drawer or stacked on a countertop, now is a great time to organize important records says David Bach a contributor to NBC's Today Show. Doing so will make it easier to keep track of your finances, plan for the future and respond to the unexpected.

David recommends you begin by gathering important financial documents and putting them in a "Start Over" file folder.

First, purchase 15 or so hanging folders and a box of at least 50 file folders to put inside them. You may want to color code your hanging folders as shown in the photo to the left to more easily distinguish assets from liabilities. Then label the hanging folders as follows:

The File Folder System

1. Tax Returns. This hanging folder should contain four file folders, one for each of the last three years plus one for the current year. Mark the year on each folder's tab and put into it all of that year's important tax documents, such as W-2 forms, 1099s, receipts to support deductions or credits, and (most important) a copy of all the tax returns you filed for that year.

"Generally speaking, you don't need to keep tax records for more than three years, although some documents such as records relating to the purchase or sale of your home, stock transactions, retirement accounts, and business or rental property should be kept longer," says David. He keeps all tax documents for at least seven years, but that's an individual decision, he says.

2. Retirement Accounts. Place your retirement account statements into this second hanging folder. Create a file for each retirement account that you and your partner have. For example, if you have three IRAs and a 401(k) plan, then you should have a separate file for each. The most important documents to file are the quarterly statements.

If you have a company retirement account, you should also keep your sign-up package because it lists the investment options you have - something you should review at least once a year. You don't need to keep the prospectuses that the mutual-fund companies mail you each quarter. You can request those as needed.

Page 2