It doesn’t take a very complicated financial life to find yourself lost in a forest of financial papers. Loans, and taxes, and bank statements – oh my!
What can you toss? How long should you keep your financial records?
There are some documents that you need to keep forever, such as birth, marriage, divorce, and death certificates; adoption and citizenship papers; estate planning documents like wills, trusts, and power of attorney documents; military and immunization records; passports; and Social Security cards.
Keep all such records in a home safe or safe deposit box.
Here’s your guide to all the rest.
Federal and State Income Tax Returns
All financial paper trails lead here, so it’s what Uncle Sam cares about the most. To always be ready for an uninvited dinner guest bearing an IRS badge, keep your returns along with supporting documents for at least seven years.
Keep pay stubs for a year. After you receive your year-end W-2 statement, you can toss the stubs and put the W-2 statement in your income tax folder.
Keep statements you receive throughout the year until you receive year-end statements. Put those in your income tax folder. When you get receipts for clothing or other items you donate, put them in your income tax folder as well.
Assuming you check them for accuracy, most monthly or quarterly statements can be tossed at the end of each year (always shred financial paperwork before throwing it in the trash or recycling bin). The one exception is any statement showing an investment that was bought or sold. In the year when the investment is sold, transfer those statements to your income tax folder.
It isn’t essential that you keep year-end portfolio summaries, but it’s helpful since it’s one of the easiest ways to look back on how your investment portfolio has performed. What is essential, though, is keeping year-end investment tax statements. Put those in your tax return folder.
Bank/Credit Union Paperwork
Check monthly statements for accuracy and then toss at the end of the year. You can get rid of ATM statements right after you reconcile them.
Keep year-end tax statements (which show the vast amounts of interest you’ve earned at 0.1 percent!) with your tax return folder.
Credit Card Statements
It’s a good idea to keep monthly statements for bills for a year in case of any disputes.
Student and Other Loans
Keep all loan contracts for as long as you have the loan. Year-end statements showing any deductible interest paid, as in the case of qualifying student loans, should be transferred to your income tax folder.
Put property tax and year-end mortgage interest documents in your income tax folder.
Any receipts for major home repair or remodeling projects should be kept for as long as you own your home. A receipt for a tube of caulk? Toss it. A receipt for a new granite counter? Keep it. When you sell your house, those receipts will help you document improvements that may impact the value of your house.
If you sell your house, keep documents related to the sale in that year’s income tax folder.
Monthly statements can generally be tossed after you get a new one. However, if you are self-employed and work from home, you may be able to write off a portion of your utility costs. If that’s you, keep these statements for a year and transfer them to your income tax folder at the end of the year.
You may want to hang onto these receipts for as long as you own your car or truck. When you sell your vehicle, the new owner may appreciate having these records.
Keep your policies for as long as they’re in force. Keep premium billing statements until you get a new one.
If you pay your homeowner’s, renter’s, or car insurance premium every six months, that can be a great reminder to check for any significant price changes and to review your coverage. It was during one such review that we made a change to our homeowner’s insurance coverage that proved very beneficial.
If you file a claim on your homeowner’s, renter’s, or vehicle insurance, keep all supporting documents. If you’re claiming an income tax deduction for a property loss, keep that documentation in your tax return folder.
Keep the paperwork related to doctor visits, insurance payments, and out-of-pocket payments for at least one year. If you itemize your deductions, remember that out-of-pocket medical expenses may be deductible if they exceed 7.5 percent of your adjusted gross income.
If you have a Health Savings Account, put year-end statements showing how much you contributed to the account into your income tax folder.
If you buy something covered by a warranty, keep the receipt. We keep such receipts in the owner’s manuals and we keep the owner’s manuals in file folders labeled by categories such as appliances, computer-related, electronics (TV, stereo, etc.), sporting goods, and toys.
Keeping your financial records organized will simplify your life, helping you easily find information you need, fostering a sense of financial teamwork with your spouse, and making sure you stay on good terms with Uncle Sam.
What other financial documents do you hang onto? Meet us in the comments!