Statistics tell us that 80 percent of what we file, will never be looked at again. Your time is limited and valuable. With that in mind, it is wise to think through what and why you file. There are two main purposes for filing. The first is to retain tax records required for an audit, and the second is for things you'd like to reference. With the continuing advancement of technology, our storage needs are changing and less papers are necessary.
Here are three things you no longer need to file:
1. Ideas you would like to capture (recipes, decorating, haircuts, clothing, organizing, etc.) Public speakers, teachers, writers and other professions often use stories, quotes and photos for their work. What was once necessary to store in a file cabinet, can now easily be found on Google with just a few key words. Similarly, magazines or files full of articles, recipes, decorating and organizing ideas also are unnecessary since the recent introduction of Pinterest. Pinterest is an online pin board that allows you to organize and share all of the things that interest you (thus the name). You can name your pin boards and pin nearly anything on the Internet, and it's incredibly simple to do. Evernote is another online tool worth considering.
2. Pay stubs. Each year, your employer sends you a W-2 form that is required to be sent to you by Jan. 31. On it is the calculation of your earnings from that company over the course of the previous year. It is not necessary to save your pay stubs unless you are going to add them all up to compare them to the number on your W-2 form. Some people may argue that a mistake could be made on the W-2 form. There is a slight chance that could happen. There's also a slight chance you could get in a car wreck today, but you probably aren't switching to riding your bike to work instead, just in case. One exception for keeping pay stubs is when applying for a mortgage. You are typically required to show the most recent two to three pay periods.
3. Utility receipts. They are bogging down homes all over America though they have no real value. Utility records, if needed for budgeting, can be found online so you can simply shred the receipt once the bill is paid. Better yet, go paperless and take a whole step out of the process. One exception for keeping utility receipts is when claiming a home office on your taxes. If you claim a home office, a percentage of all utilities are tax deductible, and the receipts need to be kept for seven years.
If you'd like more info on which papers to save, and which ones to toss or shred and how to categorize and name your files so you can find them, take our Piles to Files teleclass. It's our most popular class.