When it comes to financial records, many people have a hard time deciding what to keep and what to toss. I have to admit, that this topic is tough for our family, too. My husband tends to be the kind of person who wants to keep everything. I, on the other hand, want to throw away anything that we don’t HAVE to have. Which one of us is right? Well, it turns out, that we both are.
There are some things that we should keep forever. Anything related to the purchase of our home, for instance should be kept in our permanent files. Paperwork related to our IRA’s or retirement plan accounts should also be in those files. We’ve placed those into a folder in our family’s fire safe to protect them against any possible problems.
Other things don’t have to stay with us permanently, but we certainly will be keeping them for a while. Tax returns must be held for seven years. This includes the actual return, as well as all of the other papers that accompany it. W-2 forms, mortgage interest statements, and charitable contribution receipts should all be a part of this file. We create a separate folder for each tax year and store the other papers with the return they belong to.
Brokerage company statements should also be kept for as long as you own the securities you bought through the brokerage firm. These statements will be very helpful when you sell the securities and need to determine what your gain or loss on the securities was. Then, you can move the statements to your tax file for that year.
Finally, there are some things that you only need to keep for a short while. Utility bills, for instance, can usually be discarded after a year. Credit card receipts only have to be kept until you receive your statement and can verify the charges on it. Paycheck stubs are usually on kept for a year, too (just long enough for you to verify the information on your W-2).
Once you’ve worked through which financial records are needed, you’re ready to move on to my favorite part of decluttering. You get to throw out the unnecessary papers. Don’t forget, though, to shred anything that could compromise your identity or one of your bank accounts.
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{ 3 comments… read them below or add one }
If you feel comfortable scanning things and storing them electronically, you can scan the brokerage statements or even get set up to recieve them electronically. Just make sure to back up the files both at your home and use a cloud resource as well.
The IRS even accepts scanned documents printed out so you can slowly work your way to being e-clean
Again just make sure you have rock solid backup plans in place to keep the scans.
Dear Scott,
What a great idea! I’m always keeping all of these bank statements and stuff, but especially IRS statements, and over the last couple of years have accumulated a pile that I would just as soon set of fire as to have to pick up and move one more time. I might just put it all on one CD.
I’m curious, what is a cloud resource?
I usually suggest that we keep about 1 year’s financial records and 5 years of tax records. If we don’t need it after that, out it goes. Of course, thanks to the digital age we also put it all on CD and store it, so that makes it much, much easier.