Starting new year off in orderly fashion will save time, money

NEW YORK -- One of the best favors you can do yourself as the new year begins is to get your papers in order. It will save you time and money.

Need some motivation? Think back on how long you've had to search in the past for the 1099 statements and other forms needed to do your income tax returns. How many times did you pay a late fee because you misplaced a bill? Have you had to scramble to find contact numbers when a credit card was missing? And if something happened to you, could your heirs find your insurance policy and savings accounts?

The solutions are easy for those who are born organizers. The good news for the others is that organizing skills can be learned.

"Clutter is postponed decisions," says Barbara Hemphill, a professional organizer who heads the Hemphill Productivity Institute in Raleigh, N.C. In her book "Taming the Paper Tiger at Home," Hemphill emphasizes setting goals, allocating sufficient time to achieve them and using the right tools.

"Eighty percent of the time, when someone is having trouble getting their act together, it's because they're not using the right tools for the job," she said in an interview. "For your papers, you can choose a basket or a drawer or a file. It's that easy. But then you have to use whatever you choose consistently."

Hemphill advises that you divide your papers into two categories: action and reference.

Action files -- perhaps kept in a small stand on your desk -- are for bills that need paying, calls that need making and events that are upcoming soon. Reference files -- preferably kept in a filing cabinet or sturdy file box -- are for those documents you need from time to time, such as your car registration, bank and credit card account information, educational records, insurance policies, warranties and the like.

Linda Rothschild, head of Cross It Off Your List in New York and president of the National Association of Professional Organizers, says it's important not to get overwhelmed by paper.

"Tackle things in small bites," she advises. For example, if you want to reorganize your home office, start by clearing off the top of the desk. If you want to set up a new filing system, start with the tax documents that should be arriving soon in the mail. "A sense of accomplishment on a small task will encourage you to go on to bigger ones," she said.

Her suggestion for organizing tax papers requires a paper accordion file. You can subdivide it into sections for banking statements, credit cards, investments, payroll stubs and deductible items, like charitable contributions. "After you pay a bill, drop the copy in the file and by the end of the year, everything is in one place for taxes," she says. "When you're finished with your taxes, you put a rubber band around the file and you're done."

Financial planner Bill Health of Houston says he has found the best way to keep his files in order is to color code them.

"Taxes have to be red," he says. "Home expenses are blue, insurance is orange, investment files are green, permanent documents like trusts and wills are purple. That way, when I see a file I know what's in it."