How to set up an effective home filing system

This is a prescriptive guide which will help you build an effective home filing system, which will serve you for the rest of your life. Why do you need a filing system? You want to be able to quickly find the information you want. More than that, you probably want information to be quickly accessible by others who will use it. You want all your critical information to be in the right place, all the time, so you can grab it in case of an emergency. This will reduce stress and disorganization under normal circumstances, and in a crisis, it could mean much quicker action. It is an essential tool for an organized household and having one will improve your life. You will learn how to set up a good filing system, and a few processes which will reduce the time, effort, stress and money involved with the pieces of paper that you maintain. A good filing system must accomplish several goals for the user.

1. Organization - so that you (and others who use the system) can intuitively start looking in the right place for a document.

2. Visibility - so that you are able to quickly find a document once you start looking.

3. It needs to be able to handle the longevity of documents, allowing old and irrelevant documents to be purged or archived, while allowing permanent documents to remain within the system.

4. It needs to help the user manage concurrency (when there is only one valid instance of a given document at a time, such as an insurance policy).

5. It needs to be simple to use, or it will not be used.

6. It needs to be flexible to meet the needs of the individuals using it.

That may seem like a tall order, but it is actually easily achievable. There are three parts to success though – a good system is important, but you also need some knowledge about how to operate the system, and you need to understand some organizational principles.

This page will give you all you need to know about all three. If you are willing to learn some very simple organizational definitions, make daily decisions based on a few simple principles and adopt an organizational process, you will be successful and you won’t have to think twice about it after a short time. On the other hand, even though this document will teach you how to create a great filing system, it can’t help you if you aren’t willing to use it.

First, let’s understand some basics about filing systems, starting with some definitions.

A filing system is a system of organizing documents. Documents are organized into folders, files and sections.

A folder is a placeholder for a group of similar files, a file is a group of similar documents and/or folders, arranged in some order (e.g. alphabetical, numerical), and a section is simply a logical grouping of similar files, sorted in some way (e.g. alphabetically or by age), depending on the type of document.

The sections are arranged so that the least frequently accessed are at the back of the system and the most frequent are at the front, which gives you easy access. The filing system consists of as many sections as you need to logically break up your files into quickly accessible structures, without having too many for organizational simplicity.  Don't worry, I promise this is much easier than I am making it sound right now, but we really need these concepts.  Take a look at the diagram below:

You need to be able to tell the difference between section labels and individual file labels at a glance. So we differentiate section titles in two ways in order to achieve this.

Each section contains one or more files. As mentioned above, the first file in a section actually has two tabs; one for the section title and the other for the name

of the first file in the section. Every other file in a section has only one tab, the label of the file name, which is offset from the previous file for visibility, so that you can see as many labels at one time as possible.

 Now that you know the basic elements of a good filing system and understand how it is organized, the next question is how to choose the specific sections you need and create logical groups that are specific enough without being too cumbersome. For many people, this is the hardest part, so a good portion of this page is devoted to a list to get you started. You may wish to expand the list below by adding files or even complete sections, but get started with the following – I have found this list to be comprehensive in most situations in my life – and remember, you can always modify this later to suit your needs.

We will cover the main sections of the filing system from back to front, with least accessed files at the back. The filing system outlined here consists of 4 main sections including archives, core files, and more frequently accessed documents such as bills and statements, current tax information.

Archive sections:

Both of these sections help the user maintain important documents for long enough, but not so long that there is useless clutter in the filing system.

Section 1 - Tax return archive: This is an archive of tax returns for the last 10 years (or you can ask your accountant how long to keep tax returns). If necessary, divide this section with a folder for each person. This section is placed at the back of the drawer since it is the least frequently accessed. Simply start with a fresh hanging file each year and archive or purge the oldest (For the year 2010, you would purge the tax return documents from the year 2000).

Section 2 - Statements, Bills, Receipts, Household Budget, Tax Deductions and Income archive: This section contains a file for each previous year you would like to keep records. Normally, records older than a year or two in this section can be purged. The contents of each file from the Statements, Bills, Receipts, Household Budget, Tax Deductions and Income (current year) section (below) are moved to a folder at the beginning of a new year, and all the folders are placed in a file in this section.

Section 3 - Core Files -

Looking at this list of files, you may be wondering why there is a separate file for auto records and auto insurance or home records and home insurance. The answer is because typically only one valid insurance policy can exist at any one time for a car. Every 6 months or year you get a new auto insurance policy, but you don’t really need to keep an old insurance policy around once you have the new one. So you replace the documents in the insurance category, whereas you would keep maintenance records for the life of the vehicle (and perhaps pass them to the next owner when selling the vehicle). The core files section can contain both permanent documents and single-instance documents. Any time you file something into the core files section, you need to decide whether it is a permanent or long term document, or a single-instance document. If it is a single-instance document, get rid of the old one when you file the new one. This keeps the filing system free of outdated information.

• Auto Records – in this file, place a folder for each vehicle. This is where you place all the maintenance records, titles, and other permanent records for vehicles. This is an example of a permanent file.
• Associations, Club membership documents, etc.
• Education Records – each family member has a folder in this file.
• Employment Package – each job held in the household has an employment package folder in this file
• Family History – if you keep genealogy or family history records, add this file. If not, consider adding it anyway, because you might want to one day.
• Home Records – the termite inspection, the sprinkler system installation, the deed to your house. This type of document can go into folders here.
• Insurance – folders for health, personal residence, auto, etc. This is usually an example of single-instance documents.
• Investments Owned
• Lease or Mortgage
• Personal documents – each family member has a folder in this file.
• Service Agreements – Cell phone, Internet, cable, lawn and garden, and other service agreements can go in this file.
• Warranties, Manuals – Keep warranties and manuals for appliances here until you sell or replace the appliance.
• Will, Trust, and other Estate planning

Section 4 - Statements, Bills, Receipts, Household Budget, Tax Deductions and Income (current year)

– this category contains 12 individual files for each month of the current year, in addition to some tax information which is maintained separately from the income tax archive. At the beginning of each new year, the contents of each individual file is moved to a folder, and these folders are placed in a single file in the Statements, Bills, Receipts, Tax Deductions and Income (archive) section.

• January
• February
• March
• April
• May
• June
• July
• August
• September
• October
• November
• December
• Income, W2, Misc.
• Charitable Donations
• Medical Expenses
• Other Deductions

Those are all the sections and files most people will probably need, but of course the best part is that you can expand or customize this to your own needs.

Now let’s talk about what materials you will need to put this together

First, you’ll need some sort of container to put your filing system in. Anything will work, but some things will work better than others. Anything from a cardboard box, to a plastic crate or box, to a drawer in an existing filing cabinet, to a fireproof safe with rails for hanging files will work. Anything with rails for the hanging files, big enough to hold enough hanging files and their contents is ideal. Depending on your goals for portability, security, and budget, you can choose from among plenty of off-the shelf file cabinets, boxes, etc. Second, you will need enough hanging files to put the system together. Since you will need about 30 for the sections and files listed above, buy a couple different varieties if you’d like (for instance, the Statements, Bills, Receipts, Household Budget, Tax Deductions and Income archive will be particularly big). You will probably want to stick with letter size, 5-tab hanging files for the main sections and files, but there is no rule against using something different. Third, you will need to have enough folders to subdivide your files. This is dependent on the members of your family, how many vehicles you have, etc. Get a few more than you think you will need and throw them into a spare file, it never hurts to have extra folders. Finally, you need labels. You could use the ones provided at the end of this page, or create your own, purchase pre-printed ones such as from freedomfiler or even hand write them. Assemble the tabs and place the labels in them (just remember the section title always goes in the front right-hand side of the first file in the section), then put the files in the container and you are done! Well, almost. There is one additional piece of the filing system to cover.

Every day except Sunday you get mail, right?  Until the post office stops delivering it on Saturday anyway.  If you are like most of us, the mail you get is 90 percent junk that you want to keep out of your filing system, about 9 percent bills that you must pay, and usually less than 1 percent you genuinely are interested in reading, like a letter from your auntie.  OK, so now that you have a nice organized filing system, does that mean every time you arrive home from a long day at work you are expected to immediately rush off and sort mail, pay bills and file? No way! That’s too hard and it takes way too much time.  Here’s what you do; you use a time management technique for repetitive tasks called "batching".  So don’t even look at the mail. That’s right, don’t even look at it. You put all the mail, unsorted, into something called the home inbox. The home inbox is just a box or drawer by the front door that can catch all the mail unsorted for the week. Then you deal with the mail all at one time, once a week. Just go ahead and pick one morning or evening to take about 15 minutes to go through the mail for the week. Go ahead!  I challenge you to try ignoring your mail for a few days. This minimizes the time it takes to deal with the mail and assures consistency. In addition to being a place to catch mail, the home inbox contains a few office supplies you will need to deal with the mail: Envelopes, stamps, a calculator, a checkbook, and a notepad, is all you need and a letter opener is useful to really tear through it.

How to use the home inbox:

Get the contents of the home inbox. Sit down at a surface with enough room to work, like the kitchen table, or if you pay bills online, you’ll need to sit down near the computer (thank you captain obvious). Now stack all the mail and open every envelope at one time. Then take out the contents of each envelope and sort it into piles: "trash", "sensitive trash" – things like credit card applications or other documents which might be used in identity theft, and "needs further action" – things like bills and that letter from Aunt Bee. Throw the trash away, shred, or otherwise destroy the sensitive trash (I like to burn mine but whatever floats your boat), and pay the bills. All this should take about 10 or 15 minutes under normal circumstances.

Now that you have a good filing system, you will want to make sure it does not become cluttered with useless junk or outdated information. Here are a couple processes you can adopt to keep your filing system operating at peak efficiency. Use the home inbox as described above – this is the most important way to make sure trash doesn’t make it into your filing system in the first place. Get rid of all envelopes - if it has some special significance, go ahead and keep it, otherwise, prune any piece of paper from the system that is not a document. If the envelope has an address or some information written on it you would like to keep, consider creating a flat document with the information. Conduct a once-per-year maintenance checklist - There are a couple of maintenance steps you should take in January and one at tax time:

• Warranties and manuals file – check for any warranties which have expired and any manuals which are no longer needed.
• Migrate the contents of each file from the Statements, Bills, Receipts, Household Budget, Tax Deductions and Income (current year) section into a labeled folder, then put all the folders into a single file for last year. Likewise, rotate last year’s archive into year before last, and remove the file from two years ago from the system (you can reuse the folders).
• File the latest tax return documents and purge the oldest.

Well, that wraps it up.  I hope you have found this helpful.  If you implement this, it will save you some serious time, and might just help you remain calm in a crisis.  You can use the labels provided here to get started with your filing system.