Whether filed or piled, many of the papers that accumulate in a household don't need to be kept. Sorting them and deciding what to keep can sometimes get overwhelming. If you're looking for guidance on that, we have a separate blog post on what papers to keep, and for how long. Better yet, here's a plan for minimizing this task going forward. Unless you love sorting and filing papers, and can always find what you want within a minute or so, read on.
PSST: Plan, Scan, Shred, Toss
If you face a daunting stack of documents to sort, it's best if you take immediate steps to reduce it quickly and minimize future piles. An easy system for doing so can be summarized in an acryonym, PSST: Plan, Scan, Shred, Toss.
Plan in advance
Plan ahead to minimize paperwork by shifting to online banking, bill payments, accounting and e-statements (from banks and credit cards). Experts say that minimizing printed financial information also gives you better protection from identity theft.
You can also use free online accounting services such as Mint.com (formerly Quicken Online), and some online banks provide extra budgeting, bill payment and accounting services too. We have a separate report on online banking that covers these services in great detail.
Scan all you can
You can save a lot of time, energy and worry by investing in a small scanner designed for quick scanning of receipts. Our full report on scanners recommends the Fujitsu ScanSnap S1500 (*Est. $425), which includes software to organize and search the scanned documents. Though the price may give some sticker shock, this scanner wins high praise for its speed and efficiency in both professional and user reviews. Owners say it's amazing how quickly you can zip through a huge pile of receipts -- and they don't need to be organized or sorted first.
Essential to relying on scanned records, of course, are solid computer security plus a dual system for backing up the computer files: an automatic online backup service, plus an external hard drive. Our report on Internet security software notes that reviewers give Norton Internet Security 2011 (*Est. $70) top ranking.
Online backup gives you access (via password) to your files from any computer, and several good choices are moderately priced -- for example, MozyHome (*Est. $55 per year) -- yet give you an automatic backup without your having to lift a finger. Another top choice is Dropbox (*Free for 2GB). For more options and details, see our comprehensive report on online backup services.
It may be simplest to make a quick routine of scanning documents as they come in, then deciding which to shred and which to just toss in the wastebasket. Then you don't need to think about how long to keep documents related to taxes, home ownership, medical care or investments. The records are just there, and searchable for when you need them.
Keep crucial original documents safe
Some important original documents can be filed in safe locations outside the home. For instance, real estate deeds are filed with the county clerk, with a copy at the lawyer's office. Wills and other estate planning documents are also best kept with the lawyer. Copies, of course, can be scanned. Stock and bond certificates can be left with the broker.
Other crucial original documents need to be protected from fire, water and burglary. Surprisingly, a safety deposit box isn't the best place for everything. If a safety deposit box owner dies, access is closed for probate even if another person is a joint owner. That's why a safety deposit box is not the place to store wills or proof of funeral and burial prepayments.
It can be convenient to scan copies of important documents for quick access, but keep the original, official documents in a safety deposit box or in a home safe rated for protection from fire, water and burglary. Passports and other proofs of identity are valuable to thieves, so they need to be kept in burglar-resistant as well as fire-resistant storage. A fire-resistant home safe certified by UL as a Residential Security Container (RSC) for burglar resistance doesn't come cheap. One of the best bets we found, the Gardall FB-1212 (*Est. $640), only provides about a cubic foot of storage space. We go into much greater detail about what documents to save (as well as where and how to preserve them) in a separate blog post.
Shred to prevent identity theft
After you've scanned in your receipts and documents and they're safely backed up, how do you dispose of the papers? Shred or toss, and the distinction depends on whether a piece of paper includes any account numbers or personal information that might be of use in identity theft or fraud. Experts recommend shredding the following after you've scanned the information you need:
Kiplinger notes that some banks charge for documenting cancelled checks after a short period, so if a copy is essential for a tax deduction, print it while online access is free. Then scan it in and shred the printout.
Crosscut shredders are recommended for better security. We have a full report on paper shredders, with the Fellowes Powershred W-11C (*Est. $65) cited as a top pick. The full report discusses other good options as well.
If the shredding task looks overwhelming, consider taking advantage of the bulk shredding days some communities and banks offer. There are also shredding services that can get it all done for you. By the way, the jury is still out as to whether it's safe to use shredded paper as garden mulch.
Toss this stuff
Even after planning, scanning and shredding, you'll still have some paper to toss in the wastebasket:
What you're left with
Once you're done planning, scanning, shredding, and tossing, your remaining paper files should include:
Of course. the PSST system isn't the only option. If you prefer paper to computer screen, and feel more comfortable with folders of papers, it's fine to have more papers at home. For a comprehensive list of what papers to keep where, and for how long, see our accompanying blog post on exactly what papers you should keep.