Yeah I know, you know what I am going to say, “keep your receipts”. We all know to do it, so why don’t we? I think there are 3 main reasons. First, we don’t want extra paper hanging around. Second, we don’t have anywhere to keep them. Third, we don’t do it immediately and just end up throwing them away. A good way to store our receipts is to staple the sides of a manilla folder together so it forms a pocket. Write on the tab the specific areas the folder will hold such as house, college or medical. In order to stay organized with them, you need to know WHY you should keep them.
1. Double check: Always double check your receipts, it is not uncommon to find that you were double charged for items, or that a sale price was not correctly applied. For example, recently at Wal Mart the items I purchased after Christmas should have been 50% off, but were rung up at regular price. Some stores have a policy that if the item is rung up incorrectly you can get it for free! Have 1 spot you put all receipts in your wallet or purse so that they will not get lost or in the way of everything else. Even a tiny coin purse will do the job efficiently. As often as you can, go through those receipts and decide where the next step is for them.
2. Reconciliation: If you charged either to your credit or debit cards, you need receipts until you are sure that the correct amount was charged to your account. Keep all those in an envelope where you open your bills and go through them when your monthly bank statement or credit card statement arrives or you can look at your account online. If they were charged or refunded to your card correctly, then you decide if you need them for the long term. Make sure you are checking your credit rating number once a year so that you can see if anything on the report is incorrect. If you have receipts or monthly statements showing payment it is much easier to get bad marks removed.
3. Warranty and Guarantee: Many things we buy have great warranties, but only if we keep the original receipt with the paperwork. Once you know you have been charged correctly, receipts should be stapled to the paperwork that come with an item. I have a filing cabinet and one section is dedicated purely to this type of paperwork.
This includes more than what we purchase at a store. If you buy items at a home party those are equally important. For example, my Pampered Chef cookie bar stone pan was broke and I needed my receipt to show it was less than 3 years old to have it replaced free of charge.
4. Reimbursements: Have you ever bought something for work and could not get paid back because the receipt disappeared? All those type of receipts should be turned in immediately! Don’t forget to make a copy just in case the next person loses it. On the top of each receipt make a short note of why it needs to be reimbursed. Such as the trip you were on, who you took to lunch or who authorized the purchase. Have a file in your cabinet specifically for these types of receipts. If you cannot turn one in right away, keep it in the file with your copies. Once you are reimbursed toss the receipt and the copies.
5. Taxes: If you itemize, then you need to keep your receipts for anything that can be a deduction such as school, medical expenses and daycare. Do you do your own taxes or do you take them to a professional? If you keep your receipts organized, it will save YOU a lot of time and frustration. If you hand them off organized it will save you MONEY. How you organize these receipts will depend on what you need to claim. I create a new folder for each category. As you receive your end of year statements, put them all with these folders so that they don’t get lost. Then when it is time to file your tax return, you only have to deal with 1 folder at a time. After the receipts have been totaled, staple each category together with a grand total on top. All the bundles go into a manilla envelope with the year written on the front and a copy of the tax return inside. Be sure to SEAL so that nothing is lost. This allows you to easily file all the information yet still have access to it if needed. The one exception to this are receipts for your house.
6. Resale: Receipts that paid for work done to the house should be kept in a separate file along with the contact information of anyone you hired to do the work. This allows you quick access if something goes wrong, such as the new roof leaks. While the file cabinet is a good place, another is a binder. This is especially true if you are having a major renovation done or a custom build. This way you can have everything together in 1 place, including permits.
The same rule applies to your car. If it were to be in an accident the insurance company would want proof that you did any special improvements to the car, such as a larger motor or expensive rims. Do not keep these in your car!!!! However, they should be handed off when you sell or trade in your vehicle.
7. Proof of Payment: Especially when you pay cash, a receipt is your only proof that you paid. My daughter lost a book in 5th grade and we paid for it. In 6th grade she was told she still owed on it. She took the receipt to her new school and was able to prove we had paid for it. If your child does not receive their annual, a receipt is all you have to show they did indeed pay for it. All school receipts should be kept till the end of the school year when you are told your child owes no money. If you do automatic payments from your checking account, monthly statements are proof that it was done on time and can save you late fees. Unless you have a business or a sudden influx of money, bank statements generally only need to be kept a year.
8. Refunds – Lets say you pay for a trip that is cancelled, a receipt is how you are going to get your money back. It should be dated, signed and specify what the payment was for. Often the receipt will tell you who to contact for that refund. Paying for many things with your credit card also provides insurance to help with refunds.
When you have filed this year’s tax return, go through your paperwork from past years and toss all the items you no longer need. Doing it once a year allows you to complete a major purge. If the warranty is expired, toss it. If you no longer own it, toss it. If you have reconciled it, toss it. I have heard a variety of numbers on how many years we should keep our tax returns so I suggest just ask your accountant. They know your finances far better than anyone else!
Many areas offer free shredding so that your financial information is properly destroyed. If you don’t have that option, invest in a personal shredder to protect your identity. This includes carbon copies of checks because your signature can be learned, checks can be washed and reused, and account information makes everything accessible to thieves. Don’t forget to destroy old checks on accounts you have closed, thieves could still use them and damage YOUR credit. Many years ago my checkbook was stolen and the stress it caused for months was immense. I cannot imagine what it would be like to have my identity stolen and don’t want to.
Meanwhile, invest in a fire safe to keep papers that are the most important. This includes birth certificates, most recent tax returns and insurance policies. Keep your receipts, keep yourself safe and keep more of your hard earned money.
UPDATE: The Wall Street Journal has a great article about the documents you need to prepare in case of your death.