It's amazing how quickly all your financial documents can start to pile up. From bank statements and pay-stubs to grocery store receipts and medical bills, these documents seem important at the time, but what do you really need to keep and what can you get rid of?
If it's time for you to de-clutter your filing cabinet, your desk drawers, and all those various hiding places where miscellaneous scraps of paper tend to get tucked away, then here's a list of what you should keep, how long you should keep it, and what you can toss!
Keep Forever
If you’re long overdue for some organization in the paperwork department, start here! This category includes all the super-important life stuff that’s usually issued to you only once (and therefore is a total pain to replace):
- Birth and death certificates
- Social Security cards (including expired versions)
- ID cards (including expired versions)
- Passports (including expired versions)
- Marriage licenses and divorce decrees
- Copies of wills, trusts, and powers of attorney
- Adoption papers
- Records of paid mortgages
- Safe-deposit box inventory
PRO TIP: Your “keep forever” documents should be kept in a secure place. A locking file cabinet in your home is a popular choice, but consider upgrading to a safer alternative like a fireproof safe in your home or a safe-deposit box at your credit union or bank. Also consider scanning these documents and having them backed up on the cloud (and password protected, of course) so that you can access them remotely and quickly in an emergency.
Keep for 7 Years
This category includes all supporting documents for your income tax return, plus a couple of other odds and ends. So, what sorts of documents should you hold onto for 7 years?
- Income tax returns
- Any forms that support income or a deduction on your tax return (e.g., receipts, canceled checks, W-2 forms)
- Records of selling a house or stock (documentation for capital gains tax)
- Records of paid-out loans
- Records of sold investments
- Mortgage documents
- Medical records (including bills, prescriptions and health insurance information)
PRO TIP: This may seem like a long period of time, but it’s not an arbitrary number; 7 years is how far back the IRS can go to audit a tax return. The auditing window is technically more like 3 to 7 years, but it's better to be safe than sorry so we'll stick with 7 years. If audited, you are required by law to provide the documentation that supports the claims made in your tax return. Being well-organized is the best way to make the process as quick and painless as possible.
Keep for 1 Year
This category mostly consists of these documents:
- Bank statements
- Pay stubs
- Quarterly investment statements
- Canceled checks
PRO TIP: A good rule of thumb is to keep your monthly/quarterly statements for the current year, and then shred them once you’ve reconciled them with an annual statement. The exception is any statement needed for tax purposes; those get grouped into the “keep for 7 years” category.
Keep for 45 Days
This is category consists solely of:
• Credit card statements
PRO TIP: Shred credit card statements after 45 days, but hang onto those statements that you may need for business expenses, for your taxes, as proof of purchase, or for insurance purposes.
Keep for 30 Days or Less
These documents might seem important, but you don't need to hang onto them for long:
• ATM slips
• Utility and phone bills
PRO TIP: ATM slips can be tossed once you’ve checked them against your monthly bank statement. Utility bills and phone bills can be shredded after you’ve paid them, unless they contain tax-deductible expenses.
Keep as Long as Active
This bonus category is a catch-all for agreements and contracts that are active for varied amounts of time:
- Warranty information
- Insurance documents
- Vehicle titles and loan documents
- House and mortgage documents
- Pension records/retirement plans
PRO TIP: You’ll want to hang onto the records in this category for at least as long as you own the asset. For major purchases, stapling the original purchase receipt to the user manual or warranty information will keep everything in the same spot, should you need to make a warranty claim. Documents relating to improvements and upgrades on your home or vehicle should also be saved alongside your title and loan papers.
Sorting through financial documents is a pretty straightforward process once you figure out how long you need to hang onto specific types of documents. Doing a periodic cleanup will save you time and hassle in the long run, and will keep your desk drawers and filing cabinets clutter-free in the meantime!
