Might Be In Over My Head…Maybe?

Project Organization: Purging of the FilesAlmost sounds like a bad B movie from the 50s…and it definitely is a horror show of paper…all those dead trees. In our family, we have my husband who works at a traditional 9-5 job, is divorced prior, and his records, me who has two businesses, Mary Kay and this amazing blog, previous traditional employment, tons of medical records (ugh!), and all my “records” and then there is our son…and yes he has his own paperwork. Currently, I have 4 lateral file drawers, 3 letter traditional desk file drawers, a 4 drawer extended vertical file cabinet and several, several boxes and bags of my husbands last 6 years of paperwork and divorce papers…we are swimming in paperwork. Purging is an absolute must!

I generally recommend and do purge my files every 1 year (though sometimes I have stretched for 2 years during my most busy times). However, between inheriting my husband’s files and, truth be told, recent 6 years of craziness, I am behind on my full purge of my files. At this point I need to resist taking everything out of the drawers and lighting the biggest beach bonfire ever. Purging of files needs to be just as systematic as setting up a efficient filing system. Haphazard purging can lead to tossing something you should keep.

Divide and Conquer

Probably one of my favorite military strategies but even more so for organization. As I start to purge, I divide up the files I am going to purge and take the purging in shifts. After all most of us have files set up, even if they are not always used or work the greatest. For purging, I divide by the following:

  • Active Files (explained more in my upcoming systems post but basically the files you are in daily to weekly)
  • Personal Files
  • Business Files
  • Tax Records/Filings
  • Dead Storage
  • Husband’s Divorce (only for this purge)
  • Husband’s Back Files (only for this purge)

By dividing my stacks of files in to manageable pieces it does two things. First, it makes it less overwhelming. Second, it allows me to keep a mental note of what to keep versus what to purge a lot easier. The purging of records is different for each but the question is the same – shred/toss, move to dead filing (storage) or keep?

Shred/Toss, Move to Dead Filing or Keep

Active Files

In general, though I will explain more in a future post, these files are files that I access on a regular basis such as credit cards files, mortgage file, receipts, etc. which are used for budgeting. Since I manage our budget once a week, I am in these files frequently. I also have active business files. Below is how I determine what to trash, dead file or keep.

Credit Card Statements

If they are within the last year (January 2014-December 2014), I keep them in my active files. If they are between the previous year (2013) to the 2nd most previous year (2012), they will get moved to dead storage. If an account is closed, it gets moved to dead storage. I retain the last statement showing the account closed and the application. All other statements are shredded. Anything older will get shredded. I don’t worry about whether the statement is tax related or not. When I first handle a statement, if I need it for tax records I make a copy and file it with my taxes.

Bank Statements, Deposit Slips, and Check Ledgers

I do the same as above. Deposit slips are stapled to the corresponding statement and I personally retain them as I have had banks lose deposits and it was that slip that showed what I had done in the transaction….got my cash back baby. Never tossed another one when the bank, which shall remain nameless, lost $500 cash of my deposit.

Loans Not Including Mortgage

These include car loans, student loan, etc. and generally I keep the application and the current year’s statements. Anything else I will purge and shred.

Mortgage

I keep a copy of the amortization schedule, current years statements and payment stubs in my active file. All other information on the mortgage is purged and moved to dead filing. I never throw mortgage information away, even in dead storage until 4 years after the sale.

Divorce Documentation

The only thing in this file is a copy of the legal orders until all issues or active concerns are finished. Anything else should be purged and moved to dead storage.

Everything else stays. You can check out my next post on creating file systems to see exactly what constitutes everything else.

Personal Files

Generally speaking, personal files are all over the place. However, they do breakdown nicely on keep for this long or that long.

Keep until Sold or No Longer Own (add four years past disposal for tax related items)

  • Automotive Records
  • Home Improvement Receipts and Records
  • Home Purchase Documentation
  • Warranties, Manuals, Purchase Receipts
  • Household Inventory (the most current version)
  • Service Contracts
  • Investment Records and Certificates – until cashed or sold (Always keep final statement or sale statement)
  • Child Support and/or Spousal Support – unfortunately it is best to keep documentation that shows you have paid or been paid for the entire term of the obligation

If I no longer own it and it happens to be past four years, its gone baby. If I no longer own it but it still is within the four years, it gets moved to dead storage.

Keep One to Three Years

  • Paystubs, 10-99, W-2, etc. – I keep current year in office files and backup years in dead storage
  • Utilities – typically only one year. If you have a home based business and use them as deductions, then see tax documentation for how long to keep

Keep Forever

  • Birth, Death and Marriage Records
  • Military
  • Social Security Card
  • Citizenship
  • Draft Card
  • Medical Records – I know some people will say for only 2 to 3 years BUT for family medical histories these records are important and you would not believe what comes back to haunt you if you have health problems. Baselines or previous episodes of a health problem are important to diagnoses. Immunization records should be kept as well. You’d be surprised how much people get asked about their immunizations as adults.

Keep Most Updated

  • Dividends and Retirement Plans – current quarterly statements, most current annual statement and the original application
  • Life Insurance – current quarterly statements, most current annual statement and the original application
  • Other Insurances (Car, Health, Boat, Home, etc.) – most updated plan statement and original application, all current year’s record of payments
  • Will/Living Trust, Power of Attorney, Do Not Resuscitate Orders, Living Will, etc. – most current, official copy

Contracts

Keep the original and any additions and/or amendments. I move expired contracts to dead storage and save for one year after expiration.

Business Files

Business files come in two different forms – those used and necessary for operating the business and those for reference.

Necessary for Business and/or Used Frequently

Most of these are purged each month or quarter as I reconcile my quarterly paperwork for taxes on income and expenses, accounts receivables, etc. However, I do have a few files that I use frequently but are not systematically purged in the same manner. For these, I generally follow two rules:

  1. Is it still relevant to my business? (This can me flyers that no longer apply as product was discontinued, magazines are out of date, etc.)
  2. Have I touched this in a year?

For both, I keep what is pertinent in the active file. If not, then I decide whether its worth saving and if so move it to a reference file – hopefully electronically scanned and filed. If not, its tossed.

Reference

This one is a little more difficult for my business. Again I ask the same two questions – relevant? and used? If it is no longer used by the company (unless really good information) then its tossed. For the items I haven’t touched in a while, I have to decide whether it is something that will help me move forward in my businesses and in the direct I am headed. If yes, I keep it. If not, then I ask myself, “Is this something I, with my personality, would really use or do?” Anything that the answer is no, goes. If yes, then I will either dead file it or electronic file it. This also applies to roles I don’t hold in the business any longer.

Tax Records

So awhile back I looked up what was stated from the IRS about keeping back up. Here’s what I found out:

  • generally 3 years is plenty
  • if you take a bad debt deductions (or basically if you run a business), then 7 years
  • employment tax records should be kept for 4 years
  • if you didn’t pay, committed fraud, or didn’t file, then indefinitely

Basically, I’m going to assume no one reading this has committed fraud or failed to file. That said, I personally always want to err on the side of caution and since tax records are used for more than just tax filing, I keep mine for 7 years. I also own a business and I don’t know anyone who owns a business and hasn’t been stiffed at least once…and hasn’t filed bad debt deduction. So in my book, play it safe and keep it for 7 years for any and all backup.

That said, I personally recommend keeping the filing for federal and state documentation (the front end) indefinitely. I never want to see the other side of marriage…otherwise known as divorce…but I know they happen. Tax records can be invaluable for showing standard of living, if a spouse made an income even if they were a “stay-at-home” parent, history of commissions, savings account status, investment status and payouts, etc.

Dead Storage and Husband’s Back Files

I’m purging based on the keep or shred timelines above.

Husband’s Divorce Paperwork

If you have been through a divorce, and whether or not it was amicable or animus, if you had attorney’s involved, your paperwork probably looks a lot like my husband’s does. Sadly, until the other spouse is decease, you got to keep it, which really sucks because it stands as a reminder of a contentious time, amicably done or not. Reality is that until the other party is deceased, the documents and correspondences can prove intent where legal documents were unclear. They can be used by your heirs for any challenges against your estate by your ex-spouse. However, if you had an attorney, your ex did or you both did, you probably have tons of copies of the same thing. While you do have to keep it, you can get rid of the duplicates. This can be a monstrous task, so in my case, I am focusing on one box at a time.

Once purged, the next step is to develop a system or set of systems that will help keep you organized and systematically purging files. Find out how in my next post.

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