Scrambling through stacks of paper to find a receipt can be a frustrating, time-consuming experience. Whether it’s to return an item that doesn’t quite fit, or to support your deductions on your income tax return, eventually we all need receipts. For most of us, finding the right receipt at the right time can be next to impossible. But it doesn’t have to be that way. With a little preparation and a lot of determination, you can organize your receipts in a sensible, easy-to-find manner.
What You Will Need:
- Notepad
- Large Expandable Folder (with sections)
- Small labels
- Pen/Marker
- Manila envelopes (clasp-style)
- Business-size envelopes
- Large, uncluttered workspace
- Time, patience and lots of coffee (coffee is optional)
How to Organize those Receipts:
- Start at the beginning of the month.
- On your notepad, make a list of receipt categories that apply to your circumstances, such as utilities, telephone/cell phone, groceries, car repair, fuel, clothing, entertainment, medical, home improvements, travel, business expenses, charitable donations, childcare expenses, loans, insurance, mortgage payments, veterinary expenses, large purchases (i.e. computer system, appliances, etc.), and internet services. Of course, this list is by no means exhaustive, and your particular categories may differ.
- The first step is to organize the receipts you already have. This is the most tedious part of the process and requires a good deal of time and patience.
- Gather all your loose receipts (or at least as many as you can find). Don’t forget to check your car, purse, wallet, and other obscure places you might stash a receipt.
- At your workspace, you should have 12 manila envelopes, a large stack of business size envelopes, and a pen or marker. Oh, and don’t forget the coffee.
- Label 12 manila envelopes by month for the current year (i.e. July, 2008).
- Go through each receipt in your pile, one at a time, separating them by category. If you have a lot, it may be helpful to label your table with strips of masking tape marked with the name for each category, so you can more easily keep track of the sections where you are placing your receipts.
- Once you have the receipts separated by category, separate each category by month (anything that is not in the current year should be set aside and handled separately).
- Working one month at a time, place the receipts for each category (for the month you are working on) in separate business envelopes. The business envelopes should each be marked with the appropriate category (i.e. “Medical Receipts,” “Utilities,” “Car Repairs,” and so on). Then place the business envelopes into the larger manila envelope for that PARTICULAR MONTH. For instance, start with January. Take all the Utility receipts for January, place them in a business envelope, mark the business envelope “Utilities” and stick the business envelope into the Manila folder labeled for January. Take all the Medical receipts for January, place them in a business envelope, mark the envelope “Medical Expenses,” and stick it in the Manila envelope for January, and so on, for each category of receipts. Then, move onto the next month. Repeat for each month, so that at the end of this process each month’s manila envelope will have receipts inside pertaining to that month neatly divided by category.
- Seal each Manila envelope that you have filled and store it in a safe place.
- If you have receipts dating to prior years, you may want to repeat the sorting and categorization process for each year.
- Once you have organized the receipts you already have, the trick is to keep all incoming receipts organized.
- Make and affix a label for each category to a section of the expandable folder (depending upon your circumstances, you may need more than one folder), and label the folder for the current year. Keep this expandable folder in a convenient, easily accessible spot.
- Each time you get a receipt, file it in the expandable folder under the appropriate category. You may need to add more categories as time goes on.
- At the end of the month, remove the receipts from each category in the expandable folder, place them in a business envelope marked for that category, and place the business envelopes in the larger manila envelope labeled for that month. Store it in a safe place.
- Your expandable folder is now ready to receive the receipts for the next month.
- Continue the process outlined in the steps 14-16 for the rest of the year, and by the end of the year, you will have all your receipts clearly labeled and categorized.
Additional Tips and Advice
- Keep an envelope in your purse and in your car for when you are handed a receipt while you’re out. Place the receipt in the envelope so that you don’t lose it and file it away immediately when you get home.
- If you have some extra patience, before placing your receipts in their respective business envelopes at the end of each month, you may want to add up the totals and mark them on the front of the business envelope. This is especially useful for keeping track of income tax deductions. It is also helpful if you have a hard time keeping track of your budget as it will give you a clear indication at the end of each month exactly where your money is going.
- If you run across a receipt that is small or difficult to read, staple the receipt to a larger piece of paper, writing out the relevant information on the paper.
- There is an online company called “Shoeboxed” that will help you keep track of online receipts. For a fee, they will also help you keep track of hard copy receipts. If you don’t have the time, energy or patience to stick with your own system, you may find this type of service very helpful.
- It is recommended that you hold onto important financial records (including receipts) for at least seven years. This is because the IRS generally has three to six years to initiate an audit. Some receipts and records should be kept for a longer time, such as home improvement receipts (which should be kept until you sell your house).
- Of course, not all receipts are worth keeping. For instance, you can get rid of ATM receipts as soon as the information shows up on your bank statement and you can toss most credit card receipts when they appear on your monthly statement (so long as you don’t need them for tax purposes). As a rule of thumb, when in doubt, keep the receipt – the extra clutter may be worth it in the long run.
Wouldn’t it be easier to just scan the receipts and create folders on your computer?
This is a great way of getting someone into the habit of keeping receipts, actually looking at what they are spending, and breaking down the task into manageable units of time. In my experience, people who only scan their documents, often fail to do so in a timely manner. Then, they lose their documents. Then, I get the “shoe box” return to prepare on April 14th. By April 14th, my good humor about shoe box returns has disappeared. I cannot wait to share it with a few clients.
Just one more comment: Regarding credit card receipts, if you need those receipts to substantiate a tax expense/deduction, statements are not sufficient proof of the expense. You must have a legible copy of the itemized receipt.
First off, great system! Thanks for sharing it.
How would you classify a receipt that has food and non-food items? I have a receipt from Target and can’t decide where to put it.
Mac,
Here are a couple ideas:
1) Make a copy of the receipt and cross off the food items with a marker on one and the non-foods items on the other. Then the receipt can be filed in both folders.
2) Write a note for whichever section is smaller that points to the original receipt in the other folder. Ex.: “Green beans, $2.09, see 10/24/15 receipt from Target in the Non-Food Items folder.” You could even go a step further and put an asterisk, sticky tab, or colored marker line on the original receipt so it is easy to find later. If you have more than one joint-item receipt, you can use a different symbol or color for each one.
3) Start another folder for joint item receipts. You could also make a note or post-it to put in the original folders (food and non-food items) to let you know that there are more items for that folder in the joint folder.