Reference Files Master Class (Part 2) — Financial and Legal Papers
As we move through Get Organized & Be Productive (GO) Month, the annual initiative sponsored by the National Association of Productivity & Organizing Professionals (NAPO), it’s the perfect time to revisit classic posts and essential concepts in paper organizing.
Two weeks ago, we looked at Paper Doll Shares 12 Kinds of Paper To Declutter Now, and while the items listed there aren’t the only papers you can purge, they’re a great start for lessening the clutter so you can see what you own, need, and must organize.
Last week, we began our modern refresh of the basics with Reference Files Master Class (Part 1) — The Essentials of Paper Filing. You can sort and purge papers without those filing resources, but having them allows you to create a system that can grow and expand as your needs change. Even somewhat orderly stacks and piles are better than disarray, but a good filing system assures you that everything won’t be sent into chaos when the kids and pets (or spouses behaving like kids and pets) chase one another through the house.
As I’ve been teaching my professional organizing clients for 22 years, all reference papers can fall into one of five categories. Today, we’ll be reviewing the first two:
- Financial
- Legal
- Medical
- Household
- Personal
FINANCIAL FILES
In almost any household, whether you’re a family of one or 10 (and I mean, geez, even the Brady Bunch, with Alice, only had nine!), financial paperwork makes up the bulk of almost any personal or family filing system.
It’s the nature of living in a Western, capitalist society in the 21st-century — everything centers around whatever represents having or owing little green pieces of paper. At least our Canadian readers have much more colorful currency.
Canadian Frontier Banknotes @2006 Bank of Canada
Your financial files keep track of money coming in (in Yoda-speak, quite literally, in-come), money going out for expenses, money we are investing and (hopefully) growing for future use, and everything related to money we give governments to run things. (If we don’t have the focus and energy to organize our financial paperwork, how would we ever deal with having to raise our own armies and fill our own potholes?!)
Let’s look at each of these categories, in turn.
Transitional Money
Most of your files will relate to money that’s coming to you or paid (or at least owed) by you. But all that money tends to funnel through a few central locations that serve as receiving and funding sources. Generally, these are bank (or credit union) accounts and brokerage accounts.
Bank/credit union statements reflect the monthly status of checking, savings, and trust accounts. These represent collections of funds that are in transition, basically at a weigh-station until you determine where the money is going. Accounts may accrue interest or have fees associated with them, and some (like certificates of deposit) act like investment accounts, but are still basically interest-bearing accounts. Take time each month to make sure these accounts reflect what you think they should.
Brokerage statements reflect investments. Separate these by investment type, like retirement, college savings, goal-related (vacation funds, Christmas Club accounts, etc.), first, and then sub-categorize (and alphabetize) by company. So, in the Retirement hanging folder, you might have interior folders for your 401(k), an old 403(b), IRAs with Fidelity and Vanguard, and so on. Each account should have its own folder.
Clearly label folders with the financial body (bank, brokerage, etc.) and account type; if you have more than one account of the same type at the same institution, put the last four digits of the account number on the file label.
Income
However many people in your household have a job (or jobs), income is likely reflected by pay stubs from employment. In ye olden days, they were truly stubs from checks received from employers. Nowadays, almost everyone gets paid electronically by direct deposit, but often receives printed pay “stubs” showing not merely what was earned, but any deductions from the paycheck. Common deductions include:
- FICA (payroll tax, which goes to Social Security and Medicare)
- Other income tax (federal/state/local)
- Insurance premiums for health, life, and disability coverage
- Retirement contributions (which may or may not be matched by employer contributions)
- Charitable contributions (also called payroll giving) like United Way
- Wage garnishments for child support or other
- Union dues
(If your income is derived from your own business, keep business files separated from personal files.)
While employment is the main category, it’s not the only type of income. You may also receive paperwork reflecting receipt of alimony or child support, Social Security income, disability payments, IRA disbursements, personal loans repaid to you, stock-dividends (outside of a dividend reimbursement plan) and lottery or gambling winnings.
This leaves aside illegal proceeds; Tony Soprano isn’t likely to give you a 1099 for the bribe he paid you. (Tony Soprano also didn’t give me a lot of options for clean language, even when I found a really applicable filing-related, if potty-mouthed, clip.)
Whether you regularly receive money or get a one-time lump sum, keep records for tax and other legal reasons (like divorce and child support proceedings, Medicaid evaluations, etc.)
Maintain an interior folder for each type of income you usually receive to make it easy to check your 1099s against when preparing your taxes. If you have multiple sources of income within one type (and get lots of paperwork for each), label a folder with the name of each high-volume payer.
Outgoing Money (Expenses)
In business, they’re called Accounts Payable. These are your regular (monthly, quarterly, annual, etc.) plus occasional (unexpected) lump-sum payments, reflected by bills or statements, like:
- Monthly/periodic personal/household bills — rent or mortgage, utilities, auto or health insurance, etc.
- Credit cards statements
- Loans — personal, auto, college, home equity, etc.
- Medical bills — these may be one-time or part of an ongoing payment plan
- Tuition —
- Miscellaneous invoices or payment records reflecting anything for or which you wish to keep careful records, like tutoring, music lessons, tuition, professional organizer, fitness trainer, etc.
If your bills are paid by automatic withdrawal, verify that the proper amount was removed from your bank account or charged to your credit card, and then file the papers away. (For now, we’re assuming paper files; we’ll cover scanning and digital filing in the future.)
You may not enjoy the paperwork, but ignoring money issues won’t make them go away. If you struggle with keeping track of finances, learning to manage them in paper form makes money feel tangible, builds financial management skills, and increases financial awareness.
Ignoring money issues won't make them go away. If you struggle with keeping track of finances, managing them in paper form makes money feel tangible and 'real,' builds financial management skills, and increases financial awareness. Share on XIf you receive paper bills but pay each individually online, write the confirmation number and date of payment on the statement. If you still pay by check, tear off the stub to mail back with your payment (assuming you’re not doing online bill-pay), note the check number and date of payment on the larger, non-stub portion of the statement.
Create an interior (manila) folder for each account you hold. It doesn’t matter if you use generic terms (cable, power, water) or company-specific (Spectrum, ConEdison, Springfield Water). The key is to create labels that reflect the way you think. Keep it simple — the more complicated the system, the more friction will prevent you from filing things away.
If you have multiple accounts for the same company — for example, one water bill for your city penthouse and one for your summer cottage (or more likely, one bill for each of several student loans), label folders to differentiate between the two. (So: “Water — Park Avenue” vs. “Water — Park Avenue”; “College Loan — 1st National” vs. “College Loan — Fred’s Bank.”)
For credit cards, if you have more than one card from any one issuing lender, put the last four digits of the card number on the label (AmEx – 4321, AmEx – 9876) to help you file or access papers quickly.
Label a hanging folder for each sub-category. If you have more than one hanging folder’s worth of interior folders, just label the first in the sequence. It will be obvious from the interior labels that you’re still in that same sub-category.
Taxes
Create at least one tax-prep folder, or have one for medical expense records, one for charitable donation records and a third for “other” tax issues. Each January, when you start receiving W-2s and 1099s, pop them in your Tax Prep [Year] file folders. Once your taxes are completed, create an interior folder for a copy of your filed return and all supporting documentation.
As an alternative to collecting active tax filing year documents in file folders, you may want to sequester them in a portable tax according file, whether pre-made like the Smead All-in-One Income Tax Organizer.
Be consistent with labeling; don’t write Tax Stuff 2023 and 2024 Taxes. I recommend Taxes [Year] and if necessary, append a clarifying note for further folders, like Taxes [Year] Amended or Taxes [Year] Audit.
While you must maintain careful tax records and supporting information, you only need to keep the most recent year or two in your active family/personal files. If you’re short on space, everything else can go into easily-accessed file archives, such as in a banker’s box.
Simulated Money
You may have things that aren’t money, but represent (or are the equivalent of) money.
For informational records, like quarterly or annual statements reflecting either employee benefit plans (like if you’re vested employee-ownership stock program), it’s easiest to file these as if they were investments. Just label them consistently and clearly.
However, don’t keep stock certificates, Bearer Bonds, or other valuable paperwork in your family files. Keep papers of significant value in your safe deposit box (see Ask Paper Doll: Do I Really Need A Safe Deposit Box? or in a fire-proof safe
.
You may also want to create a folder for simulated money with value, like gift cards, gift certificates and store credits owed to you. To keep from forgetting about them, set a monthly reminder on your phone to check the folder and spend your play money!
Financial History
For financial peace of mind and to maintain control over your financial and credit history:
Download your free credit reports from Equifax, Experian and Trans-Union, the three major credit bureaus, on an annual basis at AnnualCreditReport.com. You can just keep the PDF on your computer, but may find it easier to check for errors and compare year-to-year if you maintain a printout in a folder called, simply, Credit History.
For each of these financial categories and sub-categories, within each internal folder, I advise filing paper in reverse chronological order. You’re more likely to need to quickly access something that’s recently been filed.
LEGAL FILES
Gavel: Creative Commons/U.S. Air Force photo by Airman 1st Class Aspen Reid/af.milvv
Longtime Paper Doll readers, may think I overrepresent legal documents in my posts. Yes, you handle financial issues weekly, if not daily, but may not feel like you ever deal with legal documents. If so, you’re lucky; you’re also probably young —but don’t feel so flattered yet — because the older you get, the more important legal documents become. Not having your essential legal and legal-adjacent records when you need them is a headache!
Whether you need to prove that you own land to convincing your daughter that your son was only teasing when he said she was left on the doorstep by elves and not really family, having vital files at the ready ranges from helpful to essential. Beyond the VIPs, the the type and number of your documents will vary depending on your lifestyle, but having a system will make it easy for you to know where to put a new set of documents or find something when you need to retrieve or verify something.
VIPs (Very Important Papers)
VIPs prove you are you who and what you say you are. Each person in the family should have a VIP folder, including (as applicable):
- Birth certificates — prove identity and age
- Adoption records — prove identity, age, and legal status
- Marriage certificates — prove relationships in order to collect insurance and benefits
- Divorce and Annulment decrees and — prove you qualify for remarriage
- Military records — prove legal status and qualifications to collect medical, education, and other benefits
- Citizenship/Naturalization papers — prove identity and that you qualify to vote and hold certain jobs and elected offices
- Death certificates — to allow others to collect benefits and settle estates; to cancel certain accounts and debts
- Passports — to prove identity for travel
- Social Security cards — to qualify for benefits
- Medicare cards — to obtain your medical benefits
Guard your Social Security card/number as if it were worth millions of dollars; identity theft is a nightmare, and the value of safeguarding your SSN is incalculable.
When possible, keep the originals in a safe deposit box; failing that, use a fireproof safe, and maintain photocopies in your family/personal files.
For information on finding and/or creating these documents, revisit:
- How to Replace and Organize 7 Essential Government Documents
- How to Create, Organize, and Safeguard 5 Essential Legal and Estate Documents
- The Professor and Mary Ann: 8 Other Essential Documents You Need To Create
Estate and End of Life Documents
Yes, this hanging file category isn’t “fun.” Nobody wants to think about the end of life. But even if you think you don’t have enough assets to bother, not having estate documents means making life much more complicated and difficult for your loved ones after you are gone. Use the three posts just above as guidelines, then speak to an attorney to get help creating these documents.
The reading of the will in Monseiur Verdoux (1947), in the public domain
Keep the originals in your safe deposit box or fireproof safe; your will will likely be kept on file with your attorney and/or the county in which you live. Additionally, clearly label and maintain a file folder for photocopies of each of the following so that you can quickly check information and know if you need to make updates or revisions.
- Wills — Contrary to popular belief, it’s important to have a will even if you do not have extensive financial holdings. Without a will, literally all of your assets will be frozen during a protracted probate period, potentially creating a years-long nightmare for loved ones.
- Trusts
- Funeral Plans and Instructions
- Advanced Health Care Directive (also known as a Living Will)
- Power of Attorney documents for financial and medical decisions
- Ethical Will — This relatively newer document, sometimes called a legacy letter, allows you to create a message to your loved ones after you’re gone. It may reflect life lessons learned, apologies, and hopes.
Make an additional set of photocopies for relevant family members or anyone you’ve named as your “agent” (that is, your Power of Attorney for financial decisions or your healthcare proxy).
I am not a lawyer. And while I might rock a stunning pant suit while playing one on television, I am not your lawyer. Nothing in this post should be considered legal advice. It is organizing advice.
Titles of Ownership
You went to all the expense and effort to buy something Big Ticket, so make sure you can prove you own it. The most obvious sub-categories are for real estate (buildings and land) and methods of transportation:
Real estate
Create a folder for each piece of real estate you own and label it with the key information, like the address; if there’s no address, be succinct but descriptive.
Keep copies of the deeds and mortgage paperwork for any house, building, or piece of land (whether it’s a the Hess Triangle — the tiniest piece of real estate in New York City — or your own private island).
Hess Triangle photo by David Gallagher — CC BY-NC-SA 2.0 Deed
Note the exact transaction date of purchase/sale, the gross price, and the cost of any legal fees. You’ll need this data for tax prep when you eventually sell any property. Keep track of easements and liens here, as well.
If you own a lot of real estate, create one folder for your primary residence and keep that in front of all of the others. Then create hanging folders for properties divided by state.
Methods of transportation
Whatever you own, whether they’re cars, trucks, motorcycles, RVs, ATVs, snowmobiles, jet skis, boats, or even aircrafts, maintain a folder for each and keep the title and bill of sale for each. If you happen to have stumbled onto this post from RichieRich.com and have many of each, consider making a hanging folder for each of three categories: land, water, and air.
Note: proof of ownership is a LEGAL subcategory; insurance policies are legal (contract-adjacent) and go in the Insurance sub-category; payments for real estate and transportation will go in the expense sub-category of the FINANCIAL. Finally, maintenance records will go in the HOUSEHOLD records (to be covered in a few weeks.)
Contracts
For minor contracts like for your cell phone provider, just keeping a PDF on your computer may suffice. However, you’ll want any major legally-binding contracts accessible. These may include employment contracts (your own, and anyone who works for your household — remember, business paperwork isn’t part of the Family File system), ongoing agreements for services to be rendered, and promissory notes (like loans to or from you).
Insurance
Yes, your insurance agent can look up your coverage, but as I learned when my car was stolen last summer, your agent isn’t always sitting at her desk, waiting for your call.
There are a variety of insurance policies you may have, including:
- Auto (and motorcycle, boat, plane, blimp, rocketship, etc.)
- Homeowners
- Renters
- Health (including medical, dental, vision, other condition-specific policies)
- Life
- Umbrella
- Disability
- Life
- Long-term Care
Create a file folder for each policy, clearly labeled with the policy type (and optionally, the insurer). If you have multiple policies of the same type, label with the policy type, then the insurer, like “Health Ins. — Blue Cross” and “Health Ins. — Unum.”
Consider reviewing the following posts to make sure you understand the elements of your policies:
Paper Doll Explains Your Health Insurance Explanation of Benefits
Organize for an Accident: Don’t Crash Your Car Insurance Paperwork [UPDATED]
In addition to filing your policy documents, always keep your most current health insurance card accessible, either in your wallet or your phone’s digital wallet. Your auto insurer probably provides you with two insurance cards; keep one in the glove compartment (it may be a law in your state to do so) and one in your tangible or digital wallet.
Department of Motor Vehicles
A DMV folder is a great catch-all for everything from photocopies your driver’s license and auto registration to records of parking and speeding tickets, court summonses, proof of attendance at traffic court and traffic school, etc. Keep one folder for each driver.
Divorce or Custody Proceedings
I’ve seen with numerous clients that if you have to get legal authorities involved in custody situations or property division after a divorce, the ability to quickly access paperwork helps resolve things more quickly in your favor.
File divorce and custody paperwork in reverse chronological order in your internal files; keep a digital copy in cloud storage.
Orders of Protection
If you have an order of protection (also known as a restraining order) against someone, create a folder and make multiple copies of the order to keep in it, as you may have to give a copy to a police officer and might not get the original back. Maintain a copy in cloud storage, and have a trusted friend keep a copy in case you are unable to return to your home or access your phone.
Each individual and family is unique, as are your legal and financial situations. If something arises not covered by the above, create a folder and match it to the closest related financial or legal sub-category, and make your labels clear and specific.
Hopefully, this has given you ideas for the financial and legal documents paperwork and the categories into which you can group them for easier filing and accessibility. (Remember, we’ll talk about digital filing later on.) Next week, we’ll continue with the medical paperwork category.)
For reference, the entire series can be found at the following links:
- Paper Doll Shares 12 Kinds of Paper To Declutter Now
- Reference Files Master Class (Part 1) — The Essentials of Paper Filing
- Reference Files Master Class (Part 2) — Financial and Legal Papers
- Reference Files Master Class (Part 3) — Medical Papers
- Reference Files Master Class (Part 4) — Household and Personal Papers
Paper Doll Post:
You have a knack for injecting humour into even dry subjects like financial paperwork. That’s why I enjoy reading your posts!
P.S. My sister said I was left on the doorstep, but not by elves.
LOL! There are a lot of different versions of who left the baby on the doorstep, and they’re all done to taunt siblings or cousins! Thank you for your kind words, and my goal, whether with clients or readers, is to “bring the funny,” because it’s hard to maintain attention or interest when a topic lacks levity. (If only calculus and physics were taught in an entertaining way, I might have been a rocket scientist!)
Thanks for reading!
Oh, you are speaking my language, Julie! I have helped many family, friends, and clients get these papers together and helped maintain my business clients’ paperwork. Great advice! I agree with all of your advice.
Given that I’m Paper Doll, I was shocked by how long it has been since I went back to the basics to actually spell out the details of the Family Files rather than just referring back to those old posts. A lot has changed since I first started writing about it in 2007, but my love for organizing client papers (more than any other of the types of organizing I do) has never diminished. Thanks for sharing your thoughts, my sister in paper decluttering!
Terrific advice. I like the way you laid it out. You make it easy to read and thus, easy to implement.
Thank you, Diane. I know paper — and especially financial and legal paper — can be a dry topic. How excited can someone get about brokerage statements or insurance policies? But I’m convinced that having clearly labeled, inviting files makes it so much easier to actually get the filing done in a way that makes things accessible later on. I appreciate you getting where I’m going with this. (Happily, the medical section next week is a little more lively, no pun intended.)
Is it money we give governments or money governments take from us LOL?
I love the tips for how to label the financial files. I often find clients who have multiple files labeled with the name of an institution, but then they have multiple accounts with that same institution, and it gets very muddles. Great to put the last four digits on the label of the folder – never thought of that!
I used to primarily keep the gift cards in a specific location, but I’ve found I’m more likely to use them if I load them into the matching app (if I have it) right away. Generally speaking, I encourage people to use them quickly. I had a client to had a giant gift card wallet, full of cards, that she thinks must have fallen to the ground outside her car because she couldn’t locate it. It was a major financial loss – tough to swallow!
My husband and I recently went through the whole “end of life” documents project. So time consuming, and not cheap, I must say. But I’m glad we did it. It gives me peace of mind.
I think the last four digits will usually suffice, especially for credit cards, accounts, or policy numbers. Often, people try to put too much extraneous information (especially with brokerage accounts) and that means they have to keep up with what it all means.
I agree about the apps, but I find a lot of times my clients have gift cards for places that don’t have apps. Like, I loaded all the Starbucks gift cards into the app, but none of my local non-chain restaurants even have apps! I usually advise that if it’s something they’ll use soon, put the card in their wallet; if it’s something that won’t be used for a while, they might want to make a plan (like a restaurant dinner date) and put a certificate in their car). I feel horrible for your client who lost her whole gift card wallet!
I’m so glad you and your hubs got to complete the estate and end-of-life documents. As a singleton without kids, I know it was an easier process for me, but it’s definitely a lot of work. I think of these documents as being much like insurance policies, in that we’re doing it to make the situation easier to handle in the future.
Thank you for sharing your thoughts!
Such great advice, Julie! As someone who has organized paperwork/filing systems for myself, parents, and clients, having things clearly labeled and accessible is essential.
The families of deceased clients have told me how invaluable my work with their loved ones’ was because their families could easily find the important documents.
Over the years, I have streamlined our bill-paying system. I used to have separate files for each account. But now, since I use Quicken as our record-keeping system, I can quickly locate when and how much we paid a vendor. So, instead, I keep the paid bills in one hanging file by year. They are in chronological order. I rarely need to refer to the paper, but it’s easy to find something if I do.
When the year ends, I archive the paid bills folder labeled with the year. After seven years from the date of filing the tax return, I shred the backup. Documents are kept indefinitely if they represent capital improvements or certain financial, legal, or real estate records.
I know what you mean; for people who have to deal with the papers of someone who set up their system but is no longer able to explain it, it can be such a comfort to be able to make sense of it all!
I definitely know people who are satisfied with keeping the statements for all bills by month (doing just a whole year is a surprise!), but almost none of my residential clients use financial software. And again, the reason for doing everything by paper is to help train people who aren’t experienced with managing their finances to be a little more hands-on and attentive, and keeping their eyes on the (separated by account) prize helps with that. It also allows them to separate the documentation related to things that stay the same unless they move (electric company, water company)from what changes (cell phone service, insurance companies). Keeping accounts separate also helps note usage patterns by being able to flip through and account’s folder. Your method is definitely the advanced version, and is great if there’s no usage tracking involved!
Thanks for sharing your thoughts, and sorry I couldn’t find anything purple for you this week!
I’m bookmarking this as a reference for my system and to help clients! Such a valuable and thorough list. Thank you.
Thank you for reading, Jana!