Set up a filing system now, and you’ll reap serious benefits come tax time next year. Imagine how easy it will be to do next year’s taxes when you have all of the information that you need right at your fingertips. Instead of rummaging in all your files for receipts, imagine finding all of them together in the first place that you look. Instead of wondering how much you donated here or there, imagine finding all of your charity numbers and the paperwork to prove them in a single place. Imagine doing next year’s taxes with the confidence that if you got audited, you could answer any question the IRS threw at you in a matter of seconds because you knew where to look for the information you needed, and you knew it would be right where you expected. Start now by building a home for your paperwork, and you’ll be well on your way to making tax time a breeze. The right filing system can make the difference between a tax time that requires pulling an all-nighter and rushing to the post office at 4:59pm, and a tax time that’s smooth, fast, and easy. Read on to discover the best time to set up a filing system, how to tackle the project, a nifty trick for receipts, what to do if you feel overwhelmed, and how to stick with your filing system all year long.
When To Set Up Your System
The short answer is: now! The long answer is: set up something now as instant damage control, and set up something better when you have the time. It’s better to have a filing system, any system, no matter how primitive, than no system at all. Any paperwork management you do now will help you later, even if it’s just a matter of separating paperwork about your expenses from paperwork about your income. For a truly bare-bones instant system, all you need is two places to put papers; you can use folders, binders, boxes, or even two drawers or shelves. It’ll take you less then five minutes to choose and label your containers, so do it today, and then you’ll be able to start using them the next time you have a piece of financial paperwork to worry about. Even if this is all you do all year long, if you actually use your two folders, your tax time will be easier than if you just had one huge pile of paper. Of course, a filing system that will really make tax time a snap requires a little more thought, so try to set aside some time to do that as soon as possible. It will probably take you less than a day to set up a sleek, usable filing system and fill it with all your current paperwork, but you’ll want to be able to do it right, so plan to take a few hours on a weekend when you can get all of your materials together and take your time.
How To Set Up Your System
There’s no single right way to build a filing home for your paperwork; the only right system is the one that you’ll actually use! Start now with a few simple categories (expenses, incomes) and then sub-divide into smaller categories (business expenses, personal expenses, medical expenses, etc.) until there’s really a folder for everything you’ll need. Think back to tax time this year– what information did you wish that you had at your fingertips? Chances are, that category would make a great folder for your filing system. Keep working this way until you’ve found places to put all of the financial paperwork that’s currently floating around your life: check your drawers, your desktop, your pockets, your glove compartment, check everywhere for financial paperwork, and invite it all into your system. Come tax time, you’ll be ever so glad you did.
Dealing With Receipts
To make flimsy receipts easier to file, tape them onto regular letter-sized paper. For at-a-glance processing come tax time, take notes on the paper about what you bought, and whether it won’t, will, or might be deductible for next year’s taxes. That way, you’ll never have to wrack your brain to try and remember what something cost, or what a given receipt was for. Many institutions use this trick for tracking their petty cash, and it can make your personal filing system a lot more manageable. The next time you’re flipping through folders in search of “that one receipt,” it’ll be easy to spot!
Remember Who’s In Charge Of Your System
For some of us, setting up a filing system and collecting all of our papers and filing them is a big project. Making a change from being financially disorganized to seeing the truth about your income and expenses collected in black and white can bring up feelings of anxiety, or even guilt. However, there’s no reason to let these feelings stop you from setting up a filing system that will ease your burden come tax time. Just remember that you’re in charge of your filing system, and your filing system is not in charge of you! If you start to feel overwhelmed or stressed by the process of dealing with your finances, remember that you don’t have to set up your system all at once. You can put a few folders in place, and then more tomorrow. You can set up the framework of your whole system today, but not file your old paperwork in it until next week. Trying to do everything all at once can sometimes mean not doing it as well as you could, so remember that it’s better to take your time and do it right. After all, you’ve got plenty of hours between now and next tax time, so you can relax! Just make sure that before you quit for the day, you make a realistic plan for when you can get back to the project. Even if it takes you a hundred tries before you get your filing system fully in place and functioning, you’re making progress every time you sit down to add a single folder or put a single piece of paper in the right place, so you will get to the finish line!
Sticking With It
Now that you’ve got a great, personalized filing system in place, all you have to do is use it. Easier said than done, right? Well, not exactly. For many people, the idea of sticking with a filing system all year long is daunting. But the good news is, no matter how disorganized, busy, or just plain lazy you are, you can stay on top of your paperwork and put your filing system into practice. All you need is a realistic plan, and maybe a little bit of external pressure. For some people, the easiest way to use a filing system is simply to file each piece of paperwork as it comes into their life. For others, that sounds impossible! If you don’t feel like it’s realistic to file every piece of paper as you go all year long, try having an “inbox” file that you clear out once a month. That way, you’ll only need to take the time for 12 filing sessions during the year, and you’ll be in great shape for next year’s taxes. If you think you’ll need some extra motivation, encourage a friend or family member to join you, and keep each other accountable with monthly “paperwork dates” where you both deal with your inbox file. You’ll have fun and support along the way, and you’ll both be a lot happier at tax time next year than you were this year! You might even want to get together on April 15th and go out for a nice, leisurely dinner when everyone else is scrambling to finish their taxes, and yours are signed, sealed, and delivered.
Reference:
- Spending Wisely has tips for managing files at www.spendingwisely.com/?p=52
