Organizing financial records: What to keep & What to toss
Paper clutter is the bane of my household organization.
It seems like every time I clear up one pile, there’s another one waiting. I know I’m far from the only one with this problem. While I’m on track this year with a better organization system, I found that most of my problem comes from keeping things that aren’t necessary. This stems from not knowing what financial records to keep and what to toss.
In efforts to clean out and properly organize this year I researched what financial records really need to stay in my filing system. Now I know I’m a big “what if” person and I knew I probably kept a few extra things that could be tossed but, I was shocked to find that I keep alot of unnecessary things!
So, what financial record should you keep?
- Pay stubs– Keep through the year you are in and toss them after you get your W-2. (If you are applying for a mortgage loan keep your last couple for your lender)
- Bank Statements– Keep your monthly statements for the year as well and toss them after getting your annual statement. Keep your annual statement for 7 years for tax purposes*
- Credit Card– Keep these for one month. Once you have verified your charges and payments and it shows on you next statement you no longer need previous statements. Most credit card statements are online as well if you ever need one. Keep statements that contain tax deductible charges if it is your only record of that purchase.*
- Utility bills– Keep for 1 month or until the next statement shows you have paid your previous balance.
- Insurance– For homeowners and car insurance toss these when you get your renewal of your new policy. Keep life, disability, and long term care documents as long as these policies are in force.
- Loans– (Excludes real estate loans) Keep all documents and contracts pertaining to the loan while you are still paying on the loan. Keep your payoff statement forever.
- Real estate records/home improvements– Keep all these statements and records until you sell the house plus 7 years.*
- Car titles– Keep these until you sell the vehicle.
- Medical bills– Keep these until the balance has been paid, unless you may be deducting them on your taxes*
- Retirements plan statements– Keep quarterly statements for 1 year. Toss them once you have matched your quarterly statements to your annual statement. Keep your annual statements until you retire.
- Receipts– Keep them for 1 month or until you match your charges with you bank or credit card statements. For expensive purchases like jewelry or electronics staple the receipt to the owner’s manual if possible and keep as long as you own them. Keep receipts for tax deductible purchases*
Okay, here is what all those pretty little stars are for! The IRS has 3 years to audit you under normal circumstances and the 3 year limit is doubled to six years if the IRS finds out that you omit more than 25% of your gross income. With that being said, having your tax documents from the past 7 years is advisable. What I do is create a folder for all my tax “stuff” when I start preparing for taxes. I take that folder to my credit union to get my taxes done and when I bring it home it gets filled as is. Once I receive my tax return in goes right in that folder with the rest of the information.
Now all you need to do is organize it!
Remember those awesome DIY Magazine holders we made last week? These are perfect for organizing those important documents! What we do in my household is create one for every member of the house, so my husband, son and myself all have our own folder. There is also one for joint documents such as our marriage certificate and taxes we filed together. I also have a small file folder for monthly statements that I do keep, such as mortgage statements.
How much can you toss out now?
Did that list surprise you like it did me? I hope so! Looks like we have a lot of paper purging to do! Knowing what you really need to keep will make you completely prepared and even more organized. Good luck!
PS: Make sure you always discard documents properly by destroying all personal information.