Simplify Your Life – Clearing Away Financial Clutter

What to Keep & When to Shred

The first week of August is Simplify Your Life Week. The amount of paper we accumulate month-to-month in the form of paper statements, bills, and receipts can make you feel like you’re drowning in paper. Knowing what to keep and what you can discard can help you simplify and organize your files and finances.

Sales Receipts. If you need a receipt for tax purposes, keep it in your files for three years, after which it can be shredded. If you don’t need the receipt for tax purposes, you may want to hang onto it until you can no longer return or exchange the item. But if it’s a lunch receipt from a month ago (or even a day ago), its shred date is long overdue (unless you can expense it for business purposes).

Major Purchase Receipts. If you’ve recently made a big purchase, hang onto that receipt until the item’s warranty expires. Bills for large purchases such as jewelry, appliances, cars, collectibles, furniture, or computers should be kept in an insurance file for proof of value in case the items are lost or damaged.

ATM Receipts. Once you’ve balanced your account for the month shred ATM receipts.

Paycheck Records. Shred your paycheck records once you have compared them to your W2 and annual Social Security statement.

Utility Bills. If you are managing a home office or renal property, keep three years’ worth of utility bill records after filing your tax return. Otherwise, they’re safe to shred after one year.

Credit Card & Credit Union Statements. Keep them for three years if you need them for tax purposes. Otherwise, you can shred them after one year.

Income Tax Returns. Keep tax returns, as well as supporting documents like W-2 forms, receipts, and real estate closing statements for at least seven years – some experts suggest permanently. Please keep in mind you can be audited by the IRS for no reason up to three years after you filed a tax return. If you omit 25% of your gross income that goes up to 6 years and if you don't file a tax return at all, there is no statute of limitations.

Medical Bills & Canceled Insurance Policies. Keep these for three years.

Records of Selling a House or Selling Stock. As these transactions could have tax implications (capital gains tax), you should keep these records for seven years.

Receipts, Canceled Checks and Other Documents that Support Income or a Deduction on your Tax Return. As these transactions could have tax implications (capital gains tax), you should keep these records for seven years.

Annual Investment Statement. Hold onto these documents for three years after you sell your investment. If there are tax implications, keep them for seven years.

IRA Contribution Records. Keep these permanently. If you made a nondeductible contribution to an IRA, keep the records indefinitely to prove you already paid tax on the money when the time comes to withdraw.

Records of Satisfied Loans. Keep for seven years.

Financial records to keep while active:

• Contracts
• Insurance Documents
• Stock Certificates
• Property Records
• Stock Records
• Records of Pensions and Retirement Plans
• Property Tax Records Disputed Bills (Keep the bill until the dispute is resolved)
• Home Improvement Records (Hold for 7 years after the due date for the tax return, including the income or loss on the asset when it's sold)

Documents to keep (in a safe place) forever:

• Marriage Licenses
• Birth Certificates
• Wills
• Adoption Papers
• Death Certificates
• Records of Paid Mortgages

What to do with all these records that you have to keep long-term? Definitely don’t keep them lying around on your desk for anyone to see. File cabinets, storage boxes and expandable folders are good places to keep bills and statements. Something more secure, like a personal safe or a safe deposit box from Sandia Area are good places to keep your more sensitive documents.

Going paperless with eStatements is another great way to reduce clutter, as long as you stay safe online and keep your computer secure.

What should you do with all those documents you can toss? Don’t just dump them in the trash can. Investing in a personal shredder is the easiest way to destroy any confidential documents (anything that has your name, address, Social Security number, or any account numbers). Some shredders even allow you to cut up old credit cards. Remember, shred and shred often!