T.G.Dyar-Record Retention

T. GERALD DYAR

SFP ASSOCIATES

Business & Financial Consultant

PRACTICAL RECORD RETENTION

In the real world few of us have the discipline, time or facilities to maintain highly organized, neatly tabbed files of all the records we need to keep. So, how should you handle it? My recommendation is, set up one big file folder for each major category and put everything relating to that category into it. These folders can be simple suspension files in a real file cabinet, big heavy duty envelopes in a drawer or accordion file folders tucked away in a closet. While neatness is always good, simply saving the records is the most important thing. Here are some of my thoughts:

When you file your tax returns be sure to staple all related W-2s, 1099s, K-1s and certified mail receipts to them. Include any amortization or depreciation schedules your accountant produces.
Set up separate folders for each corporation or partnership you're involved in and include their returns, amortization and depreciation schedules and related documents. Even though someone else may be keeping the records for things you're involved in, you should always have copies of these key documents in your own files.
Have a separate folder for each piece of property you own. Whenever you spend any money on the property put the slip in the folder. When you sell it, your accountant can make the decision about the effect of each expenditure on your cost basis. In addition, when you put it on the market, you'll have a complete record of how well you maintained the property to substantiate your asking price. Fuel and electricity receipts might also be of interest, particularly to show the benefit of any upgrades in insulation, siding, roofing, windows or heating equipment that you've made.
Do the same sort of thing for each vehicle you own. It helps if you sell it or if you need to put in a claim on an extended warranty.
Keep folders for each category of after-tax investments if you manage your own portfolio. Cost basis is extremely important, and expensive or time consuming to research after the fact.
Have a big folder that contains the instruction manuals and warranties for everything you own. Don't worry about filing this stuff just get in the habit of putting it in the folder. This will pay for itself many times over.
Keep a folder containing the provenances of all your antiques and collectibles. Initially this may not have much in it, but over time it becomes very simple to clip articles from newspapers and magazines about the history and value of things you own and then stuff them in here. Be sure to include sales slips when you purchase something and any notes, letters or estate documents relating to it if it was given to you or you inherited it.
Maintain a family history folder. This will contain genealogy notes, letters about family history from relatives, newspaper and magazine clippings, etc. Your kids will be forever grateful when they find this. Over the years, little bits and pieces that don't look like much in their own right can add up to a very complete story about your family.
If they become too bulky to keep in the family history folder, have a separate folder for all your old resumes, bios and business cards.
Finally you need a record somewhere of all the stuff that's in your head that no one else really knows about. This is your personal FAQ. For this a full size 3 ring loose leaf notebook is ideal since it will probably be updated regularly. What goes in here? When to turn off the outside faucets so they won't freeze. What to do when the porch door lock sticks. When to open and close the crawl space vents. Why the microwave keeps the remote control lights from working when it's on. When to change the batteries in the programable thermostats. Who you know would love to buy your boat and would give a fair price for it. Once you start thinking about it you're going to come up with a long list of things you know that your spouse or significant other and/or kids would need to know if anything happened to you.

Over time these files tend to sort themselves out automatically. As you go through them to find something you can toss out obsolete instruction manuals for example. Once in a while on a rainy day or when the kids are visiting you can look through the family history with them and put it in sequence. Have the family read your FAQ. They'll think of lots more questions that need answers.

Remember the trick is to keep the records! The time you spend looking through a disorganized folder is nothing compared to the problem that's created by not having kept the record in the first place.

One final thought. Some of the records mentioned above are priceless in monetary and/or personal terms. You might consider keeping the originals of these at another location or in a fire safe.

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