File Cleaning For Spring
Once a year, usually when I'm finished filing my taxes as I have done recently, I go through my home office file cabinets and perform a "Spring File Cleaning." This has several benefits, including:
Helps create room to file bills for the new year and makes the file drawers easier to open and close
Allows me to archive last year's stuff in case I need it for some reason later
Allows me to check to make sure I have all my critical documents in order
Can trigger financial reminders and "to do's" that would otherwise get overlooked
It's a really good process and I highly recommend it. I used to keep several years of records in the garage, which was causing a lot of clutter. IRS rules only require you to keep three years in case of audit, subject to some exceptions of course (states may differ from the IRS requirement, for example California is 4 years). I do keep copies of all my actual tax returns going back many years prior to 2017 "just in case," since they don't take up too much space (two boxes). Also, as I discuss below, since 2017 I have been archiving my tax returns electronically, but I do keep paper copies of supporting documents in storage. For the cleaning process, I usually just get a banker's box and go through all the old bills / statements individually and drop them into the box more or less in alphabetic order since that's how my filing cabinet is setup. I am now down to just a few small boxes in the garage, which is great! In going through the filing cabinets, here's how I usually approach it:
Keep statements and bills for the current year (2020) and archive everything else except as discussed below
Make sure you keep a copy of the current insurance declaration page for all policies including homeowner's, personal umbrella liability, personal articles, rental property and auto (for auto, make sure you keep the second insurance card they send you in case the one in your car is lost); if you refinance your properties, you'll need to have the insurance declaration pages handy
Make sure you keep your most recent property tax appraisal for your home and rental properties along with the most recent tax bills; this triggered me to think about looking at property values in my area post-COVID19 to see if I should appeal my property's value like I did back in 2008 in the Great Recession
Make sure you have a copy of your most recent IRA statement; this can help remind you to plan for your current year contribution and possibly to review your investment mix
If you have one or more Homeowner's Associations at your properties, make sure you keep a copy of the current annual budget and audit (if you sell or refinance your property it helps to have these handy)
Keep your most recent life insurance policy premium payment and invoice
For memberships, keep the last bill where you paid the annual fee (i.e. Costco, AAA, etc.)
I have been trying to go with more paperless billing on all my accounts, so the amount of paper in my file cabinet is a lot less than it used to be many years ago
For the past three years, I have kept copies of my filed tax returns electronically in a iCloud folder and I no longer print paper copies (except for the filing instructions and authorizations to file electronically which have to be manually signed)
Stay safe, healthy and positive.
I hope you find this post useful as you chart your personal financial course and Build a Financial Fortress in 2020.
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