Stashes of old, paid bills, expired life insurance policies, receipts for broken gadgets, and cancelled checks for haircuts you got in college – sound like your filing system? It’s easy to get busy and let things pile up, especially when it comes to paperwork. Or if you’re like the vast majority of people, you’re simply unsure of what you should keep and what is safe to toss.
So, crank the tunes, grab a few trash bags and a paper shredder, and have plenty of caffeine handy: it’s time to clear the clutter! Here’s a basic rundown of what to toss and what to treasure – and for how long.
Toss into the trash:
- · Statement “fillers:” particularly those offers for overpriced or needless services that come in your credit card statement.
- Paid bills/receipts (unless deductible): once you have paid a bill, and have verified that the payment has cleared your account and been credited correctly, shred the bill.
- Pay stubs (older than 1 year): once you’ve reconciled your paycheck – or checked that the information on your paystubs matches your annual W-2, then shred the stubs.
- Warranties, manuals, repair records and receipts: electronics all tend to come with a file cabinet’s worth of paper. When you open the box, weed through everything and find what you really need, such as the warranty and “quick-start” guide.
Keep temporarily (until updated, sold or disposed of):
- · Current health benefit information and insurance policies (cars, homes and other valuables): until claims are settled, keep copies of the actual policies so you know what’s covered – and how to file a claim in the first place.
- Loan agreements: keep the most current terms and conditions for your credit card accounts, and toss the old. Your monthly statements can be tossed as soon as you reconcile. Same with your current mortgage and car loan paperwork. If you sell or pay off the car or house, keep confirmation of this activity for at least a year or so, particularly until you receive a clear title to a vehicle or piece of real estate.
- Canceled checks/receipts for big-dollar purchases and home improvements:don’t go hog wild holding onto every outrageous dry-cleaning bill though. Think jewelry, furniture, art, home improvements and plasma TVs. Should flood, hungry termites, or fire sweep through, these will help you prove to the insurance company how cool your stuff was.
Keep long-term (until seven years after the asset is sold):
- · Investment records: keep monthly or quarterly statements until you receive your annual summary. If everything is correct, shred the monthly/quarterly statements and retain the annual. Retain annual statements until you close the account.
- IRA contribution/withdrawal records (after you retire or close an account):you aren’t required to keep records for IRA accounts, with one exception: you do need to track any contributions (not earnings, just money you deposited to the account) that were not deducted from you taxes.
- Tax records: you are required by law to keep tax records for three years, most experts recommend seven.
- Real estate records: although the laws have been liberalized on capital gains for house sales, you may still need to track the cost basis for your home or series of homes. Keep real estate transactions (buys and sells) for each house and receipts for any large capital improvements you make.
- W-2 forms: keep these until you start collecting Social Security. You want to make sure you’re getting credit for all those years you worked for The Man.
- · Birth/adoption records
- Death certificates
- Divorce/marriage papers
- Education/employment history
- Filed tax returns (and supporting documents)
- Military records
- Heath records
- Life insurance policies
- Wills (plus current living will and durable power of attorney)
- Social Security Card
And since you won’t need to access these documents regularly, they should be kept in a secure location, like a safe deposit box.
You’ll be amazed at the difference a little organization makes. People don’t realize how much they pay as a result of having their financial papers in disarray – a late credit card charge here, a lost tax deduction there. Even greater, though, may be the long-term mental and financial benefits. Once you’re organized, you can focus on your mental energy and the really important stuff, like your investments and your financial goals. Getting your financial papers in order pays big dividends in peace of mind.