Paper.

It's everywhere. And unless you have a simple system for "processing" it, it can overrun your office, kitchen, and home.

Before I discovered the three-file system, I had all kinds of files... maybe twenty or thirty of them, all with a different label.

Every month, I'd go through all the mail and bills and file the statements. Every piece of paper went into a separate file. Which meant I was touching dozens of files every month. Filing paperwork took way too much time, and I didn't like it.

Enter the three-file system. I can't remember where or when I heard about it. But I finally got so desperate (my study was beginning to look like a storage archive minus the filing boxes), I decided to give it a try.

Here's how to set up your three-file system.

1. Get three hanging file folders and put them in your filing cabinet.
2. Label the first one "File #1"
3. Label the second one "File #2"
4. Label the third one "File #3"
5. Get a small mail organizer and place it where you open the mail.

Okay, when you've completed each of these steps, you're ready to begin using the system. Here's how it works...

Whenever you get the mail, adopt a one-touch policy. Either throw it away, shred it, or file it in your mail center. (I put statements in the large slot of the mail center and place payment slips with their envelopes into the small slot. I organize the bills according to when they must be paid.)

Now, do this for the entire month. When the month is over, take all the statements and file them in Folder #1.

During the second month, you will open and process the mail the same way. Then, at the end of the month, you will take all the statements and place them in File #1. All the paperwork already in File #1 gets moved to File #2.

During the third month, repeat the process. At the end of the month, all the paperwork in File #2 goes to File #3. File #1 goes to File #2. And all the paperwork in the mail center goes in File #1.

Got it?

During the fourth month, repeat the process again. Except this time, the paperwork in File #3 goes to the shredder. Or at least most of it. If there's something you must save for tax records or for a longer period of time, simply create a folder to store the "exceptions."

Here's what the three-folder system does. It simplifies your life and saves you boatloads of time. Instead of touching dozens of files every month, you only touch one or two. There's no separating or sorting. Five minutes and you're done.

I've been using the three-file system for about half a year now and I wonder... why didn't I do this sooner? Paperwork is a breeze now. The paper beast has been tamed.

Your action item: Go set up your three-file system now and begin using it immediately. It'll be one of the best organizational improvements you make all year.