…a companion to the “spring clean your finances” article of last week.
Last week we looked at “Spring Cleaning” your finances and I suggested going through your paper statements, whether credit card, bank, investment or mortgage, and throwing things out. I didn’t however go into detail on what to keep, how many years’ worth and how long you should hang on to those paper statements.
This article will serve as a companion to last week’s article titled “It’s Time to Spring Clean Your Finances”. If you have not had a chance to read it, click on the link and head on over there to give it a quick read.
I going to try to cover most of the important things related to your finances and how long to keep each one. I suggest getting a filing cabinet of some sort, yard sales or a used business furniture store is a good place to look. You can also buy filing cabinets that look like furniture to match your décor. Just make sure you have a secure place to store your documents, one that you can easily access and keep organized. …A cardboard box with file folders will even work, although not ideal.
There are some documents that should be protected at a higher level than a filing cabinet can provide. For these items I suggest keeping them in a Safe-deposit box. If not a Safe-deposit box then at least a fire-proof box or safe kept in a secure place in your home.
The following is an attempt to cover the important items and documents that you should hang onto. I’ll list the item, where it should be kept and how long to keep it.
Checking Statements — Filing Cabinet — Keep for 1 year — if you still receive your checking account statements in paper form it’s a good idea to hang on to them for one year, if they are used in your tax returns, keep them for 3 years. Switching to online banking and electronic statements can make your life easier.
Credit Card Statements — Filing Cabinet — 1 Year — again, if you have not switched to electronic statements it’s a good idea to hang onto those paper statements just like your bank accounts.
Cancelled Checks — Filing Cabinet — 1 Year — If you still get them, I haven’t seen a cancelled check “in person” in years. With electronic statements and online banking you can usually see a picture of the cancelled check if you need take a look at a particular one.
Paycheck Stubs — Filing Cabinet — 1 Year — I would hang on to these for a year so you can compare your W-2 when you receive it. Some of us can access our pay history online in which case I would just toss the pay stubs.
Utility Bills — Filing Cabinet — 1 Year — I personally don’t keep these but it’s really not a bad idea, you can compare months or monitor your utility usage. Hang on to these for 3 years if you claim a deduction for a home office.
Quarterly Investments — Filing Cabinet — 1 Year — Hang on to these until you get your annual statement then off to the circular file.
Loan Documents — Filing Cabinet — Until Paid Off — Personal loans, car or mortgage loans, I’d keep these until they are paid. I even hang onto them for longer but I don’t really have a good reason.
Service Agreements — Filing Cabinet — 1 year — Keep service agreements such as home appliances or HVAC service contracts for a year, or for however long the agreement is.
Receipts for Major Purchases — Filing Cabinet — 1 Year — or for however long the warranty lasts.
Tax Returns — Filing Cabinet — 3 Years — Keep your tax returns for 3 years, some say 7 years, it’s up to you. Just so you know you can be audited by the IRS for no reason up to three years after you file your tax return.
Records from Selling a House — Fire Box — Forever — I hang onto these documents, you could keep them just for 3 years, especially if for capital gain reasons.
Loan Discharge Notices — Fire Box — Forever — This is something else I like to hang onto, you can’t go wrong having proof that you have paid off a loan. …especially if it a mortgage.
Savings Bonds — Fire Box — Maturity — the best thing to do if you have savings bonds is to convert them to electronic bonds at the U.S. Treasury. Keep a list of the serial numbers at home in your fire box.
…make sure a family member knows where the key is
Living Will — Fire Box — Until Updated — When keeping important health related documents away from your home (safe-deposit box) make sure a family member knows where the key is and don’t forget to add someone else to your account so they can access it if you are incapacitated.
Living Trust — Fire Box — Until Updated — Treat just like a living will.
Life Insurance — Fire Box — Until Updated — Same as your living will and living trust.
Car Titles — Fire Box — Until Sold — If you are fortunate enough to have vehicles that are paid for you should have the title. Keep these in your fire-box for safe keeping until you sell the vehicle. Treat all titles the same way.
Birth, Death Certificates, Marriage License, Military Discharge, Adoption Papers and any Permanent Life Insurance Notices — Fire Box — Keep it Forever — It’s pretty obvious that you would never want to get rid of these things. Even if some or all of these items are available online or in electronic form, I still prefer to have the good ‘ole paper version.
So there you go, prepare your filing system, whatever it turns out to be, and remember anytime is a good time to “ Spring Clean Your Finances”.