How to Organize Files in Your Home Office

It can be quite a process to organize files at home. But once the hard work of purging unnecessary papers is done, you will feel liberated!

The 80-20 principle applies to this process. To organize office files, most people only really need to keep 20% of the paper they accumulate (usually for tax purposes or reference), and can usually shred, toss, or recycle the other 80%.

We want to eliminate the thought process of "I should hang onto this IN CASE I need it someday." Whenever you handle a piece of paper, whether it is a bank statement or a bill, you should only really handle it ONCE, maybe twice, because it will have a specific place.

In order to organize files,

First...

We have to create a home filing system and file categories for everything in the office. This may differ for your specific needs and use of your home office, but in general, a family can organize files easily by using (or purchasing) the following:

A file box for the current year. These can be relatively inexpensive (the cardboard variety) or the nice plastic ones, depending on your preferences. Label the front of the box with the current year, i.e. 2010.

An in-box for each member of the family. I recommend the vertical-type magazine boxes or a divider that hangs on the wall with pockets for each person.

Garbage can.

Recycle bin.

Paper shredder.

Scanner. (if you are going to make digital copies of papers).

A box of colored file folders. The box usually includes colors such as green, red, blue, yellow, and purple. If a file is mis-filed, it will stand out because it is a different color.
With these files, first create a series of tickler, or reminder files, one for each month (all the same color), and put important things for this month in the current month, while putting future things in the appropriate month's tickler file to remind you at a later date. Behind these, we will then organize files with specific file categories for the papers you need to store.

Example of How to Organize Files and File Categories:

Home - mortgage information, deeds, or rent lease

Employment - pay stubs (current year, separate file for each person)

Insurance - separate files for each policy: health, car, life, personal articles, home owner's, etc.

Loans/Credit Cards - separate files for each creditor

Bank Accounts - separate files for each account: checking, savings, retirement, etc.

Health - separate file for each family member

Education - separate file for each person with projects and information for the current year

Next...

When you touch any piece of paper, ask yourself the following:

Is this trash? (i.e. credit card offers, solicitations, etc.)
If so, toss it, recycle it, or shred it immediately.

Can I act on this right now in less than 2 minutes?)
If the answer is yes, act on it immediately.
For example, if you are holding the telephone bill and it needs to be paid, take 2 minutes to pay it and then file the statement in the appropriate folder. If you need to schedule something on the family calender, do it right away and trash or file the paper.

If it's not actionable right now, where does it go?
For example, if you've received the electric bill but it's not due for a few weeks, file the bill in the current month's tickler file to be reviewed later on. If the item has to be acted on a different month, put it in that month's folder. If it is only for reference, file it under the specific filing category. If the item is something that should be delegated, put it in the appropriate person's in-box. Once they have acted on it, it should filed in the appropriate folder.

Tip: Every time you receive a paper or statement, ask yourself if there is a way to make it digital.

Can you request online statements instead?

Can you organize bills and decrease paper bills by signing up for automatic payments?

Can you scan the item into a digital file that you can view on your computer and then discard the paper?

Do you really need to keep this paper, or can you access the information online?

Eventually the paper you receive will decrease as you make this transition over time.

Tip: At the end of every month, after you've reconciled your deposit slips and receipts with your bank and credit card statements for accuracy, toss or shred them. Only keep receipts if they are necessary for a warranty.

Tip: When you buy an item with a warranty, there is usually some sort of instruction book and warranty information for that item. Tape your receipt to that information, and organize files with warranties in a separate box away from your desk, since you probably won't access this information very often.

Organize files at the end of every year:

If you have itemize deductions for your taxes, you should keep your monthly bank and credit card statements. If not, feel free to toss or shred them after you've filed your taxes.

Keep your monthly or quarterly statements for investments until you receive a year-end statement.

If you use your home office as a tax deduction, you should keep utility bills and telephone bills if you make business phone calls.

After you receive your W-2s or 1099 forms for the tax year, and your paycheck stubs match, you can shred or toss the paycheck stubs.

Dispose of outdated wills, expired warranties, outdated annual reports and proxy statements, expired insurance policies, canceled checks, and documents regarding vehicles you don't own any more.

Go through all of your files and scan or dispose of items you don't need any more. You should be left with practically empty folders with filing categories as well as your tax filings, receipts, and year-end statements.

Label a new filing box for the next year (i.e. "2011"), and transfer the file folders into it. Keep it near your desk or office where you can file papers easily as needed over the next year

Now store last year's box in a different location (a closet, attic, garage, etc.), where your tax information from the last 7 years is also kept. Since the boxes are labeled by year, you can just toss the entire box once you are not required to keep it.
(NOTE: It is a good idea to check with the IRS to determine how long to keep documents (usually 7 years, but possibly indefinitely). Plus, you will know exactly where to find something should you ever need it.