smart spending

How to organize your financial paperwork

Jones has another tip for making sure you stay organized: Reward yourself for doing your filing. Jones "wins" a trip to the gym for a workout if he does his filing on Saturday.

Also, try to coordinate your filing system with your organizer, whether it's an electronic personal digital assistant, a paper-based Day Timer, or a conventional calendar. In other words, mark due dates for bills or the dates and times of social events on your calendar at the same time you are filing the invitations or credit card statements in your filing folders.

It's also important to use a system that you understand and will want to use. For instance, it doesn't matter if you file automobile-related papers (insurance policy, warranty information, maintenance records) under car, automobile or Toyota, says Korey. What matters is that you're consistent and you choose the filing system that you are most comfortable with.

Also be flexible. It may make sense to keep an 8½-by-11-inch manila envelope next to your computer so that when you pay bills that are tax-deductible, you can simply move the receipt into the folder after paying the bill. Find the simplest way to keep order among your papers.

Most people will want a filing framework that can be sorted by month, topic or another method. Then determine if you really need subcategories. "I believe that you want your filing system to be as simple and user-friendly as possible, which usually means fewer categories versus having 200 folders each with one piece of paper inside," Morgenstern says.

Sorting out filing systems

Month-by-month. If you don't have a lot of different suppliers and vendors to pay and don't own a lot of credit cards, setting things up month by month can be a great way to organize your paper files, says Morgenstern. You can even buy a self-contained accordion file if space is at a premium. If you find you have too many bills and statements to sort through each month, you can set up such subcategories as bank, utility, credit card.

Subject or category. Choose topics such as "insurance," "bills to pay," "auto," "Johnny's soccer," to file your different papers and then file alphabetically. Feel free to further subdivide by category, for example, by having a general folder for credit cards and then separate folders for each credit card company that you do business with.

Color-coded. Korey is a big fan of using color-coded folders or folder labels so you can tell at a glance what's in a folder. Financial folders can be green; social invitations, red, and insurance policies, blue.

Action, hold onto, reference. Karli Bertocchi, of Organized with Style near Chicago, recommends a filing system in which you put bills, wedding invitations, magazine renewals and other items that require a timely response in an "action" file. If you have a lot of action items, you may want to get a circular file so you can assign specific due dates. For example, put RSVPs under the third of the month if you need to reply before the 10th of the month. Legal documents, such as wills or insurance policies, go in a safe place. A separate folder could be for current items that you may need to refer to, such as warranties, receipts for bills paid, etc.

Staying organized

Once you adopt a filing system, stick with it. Don't fall back into bad habits or delay filing so long that it will take a whole day's effort to file everything. Instead, chip away at your filing. Set aside a little time each day or at least once a week to file.

And if your papers fall into disarray because of illness or more pressing work-related deadlines, don't give up. Instead, schedule time to get things back in order once you have more free time. Tackle the problem a little bit at a time.

In other words, set achievable goals. Before you know it, you'll be back to being organized.

For advice on which documents to keep and for how long, see the sidebar, "How long to keep financial records."

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