How to Organize Important Documents

There's not a whole lot of glamour in keeping tabs on your paperwork. But if you want to stay in good fiscal shape, you need to organize your financial records. Consider hiring a pro to get you on the right track--check out cfp.net to find a certified financial planner in your area.

Difficulty: Easy

Instructions

1. Organize your tax returns. The Internal Revenue Service (irs.gov) has up to six years from the date you file to audit you or challenge your returns. Keep copies of tax returns and supporting documents such as receipts for charitable contributions and miscellaneous deductions. There is no statute of limitations on investigations of taxpayers who fail to file or who file fraudulent returns.

2. Organize your investment records. If your mutual-fund company or stockbroker provides a year-end summary statement of your transactions, shred the monthly reports. Keep a record of all trades, particularly the original price of your stocks and fund shares when you sell. Also, save records of all contributions to non-deductible individual retirement accounts, as proof of already having paid taxes on the money. Keep trade confirmations for a couple of years after sales in case the IRS has questions.

3. Organize your credit-card bills. Review your statements for potential duplicate charges, then shred them when the next bill comes in, unless you are self-employed, in which case file and keep them for tax purposes.

4. File bank statements along with canceled checks and pay stubs for three years before shredding.

5. Track your charitable deductions by keeping receipts and records of donations for tax purposes.

6. To organize your medical records, save receipts and insurance payments for dentists, doctors, hospitals and prescriptions.

7. Save all real-estate records and transactions, as well as the title and deed to your house. Other records to keep include contracts and receipts for home improvement and repairs, property tax paperwork and warranties.

8. Save all vital statistics--passports, birth certificates, marriage and divorce papers--permanently.

Tips & Warnings

• Consolidate your bank accounts if you have several. You'll see your financial snapshot in one statement; also, many financial institutions offer special pricing and free services when you consolidate your accounts with them.
• Do not let strangers see your financial records. Shred any personal papers with your name, address and account numbers. They are gold mines of information for thieves who may want your Social Security number or account numbers.