Four tips to organizing paper

Keep important papers: Hang on to final credit-card statements, along with your W-2s and 1099s for up to Seven Years.

Among the additional documents you should retain: 

• canceled checks and receipts for all deductible business expenses (such as those for entertainment, home-office equipment, and professional dues) - if you do not run a business shred these documents!
• retirement-account contributions, 
• charitable donations, 
• child-care bills, 
• out-of-pocket medical expenses, 
• alimony, and 
• mortgage-interest and property-tax payments.

Don't throw out the actual tax returns or the year-end summaries of your investment accounts, even after the chances of an audit have all but vanished. These documents don't take up much space and can come in very handy for future financial planning.  They'll take up less space if you do take the time to shred the supporting documents.  So as you go through your tax boxes from 2005 and beyond, shred or toss the receipts etc. that take up the bulk of storage space.  Then you can store all of your older returns in a single box.
 

It is crucially important to keep the confirmation slips that show beneficiary designations and the purchase price of stocks, mutual funds, and any other investments you hold; hang onto these records indefinitely because some day, says Slott, "you or your heirs will have to know exactly how much you paid to determine the profit on your investment for tax purposes."

 Give Your Papers a Home:  Keep your will, birth and marriage certificates, insurance policies, property deeds, and other permanent records in a safe but accessible place near your other financial documents, so you and your heirs will always be able to get to them quickly, if they need to.

Be Systematic: Have a plan for processing all paper. 

"Your goal should be to touch a piece of paper as few times as possible, rather than shuffling it from pile to pile," says Paula Boyer Kennedy, a financial planner in the Minneapolis office of Ernst & Young. "If you stick the bill back in the drawer after you pay it, it will find friends, and they will mate and produce offspring. Pretty soon, you'll have a true litter."

 Tackle the Backlog: Once you have a system in place, you still have to deal with all the piles you've already accumulated. Instead of launching a massive reorganization, start by sorting through a small stack at a time. You can allot half an hour a day to sift through old papers, perhaps while watching the news or listening to music.