File folders are your friends.
Question: I just moved and I’m unpacking boxes of old files. What financial stuff do I need to keep (and for how long) and what can I toss? We’re talking cell phone bills from 2008, Verizon bills for landlines I don’t have anymore (because I haven’t lived in that apartment in two years), credit card statements, bank account statements, tax returns, etc. I know there are some things (like tax stuff) that you’re supposed to hold onto for a certain amount of time (right?). But in this age of paperless billing, is there any reason to keep paper copies of old bills and such or can I send them all to the shredder?
Answer: This is a particularly timely query, given that it’s tax season and tons of people are combing through their old paperwork and trying to track down receipts. I, for one, have a file cabinet full of documents I’m sure I probably don’t need, but I’m always uneasy about tossing them wholesale.
Luckily, in my work I’ve had the good luck to stumble across Paper Clarity at a Glance by Laura Moore, which provides you with, well, paper clarity. (At a glance.) Bankrate.com also has some good guidelines.
And the great news is this: You don’t need to keep as much as you think.
Here’s a basic rundown:
- Tax returns: Keep for 7 years. This includes everything you need to back up a tax return. H&R Block has a good list of what these supporting documents might include. (P.S. This might get confusing, given that you’ll do 2009’s tax return in 2010, so don’t go trashing your 2003 return. For simplicity’s sake, just keep your last seven tax returns.)
- Bank statements: Keep until you file your taxes, but keep year-end statements for 7 years.
- 401(k) statements: Keep until you receive your annual statement; keep the annual statements until you retire or close the account.
- Cancelled checks: Keep until you file your taxes, but keep any related to taxes, business expenses and mortgage payments with your tax files; keep those related to home improvements until you sell the property.
- Credit-card statements: Keep monthly statements for 1 year unless they back up your tax files; 7 years for year-end statements. Also keep any statement that proves the value of a big purchase for insurance purposes, such as furniture, jewelry, appliances, etc.
- Donation receipts: Keep with tax files.
- Pay stubs: Keep until you receive and check them against your W2 or 1099s
- Insurance cards and policies: Keep until they expire. (Then, shred city!)
- Brokerage statements: Keep monthly statements for 1 year, unless they document a purchase or sale. Keep those statements and year-end statements until those investments are sold.
- Medical bills: Keep for 7 years from the date of service.
- Mortgage statements: Keep until you receive your year-end statement and file taxes. Keep year-end statements with tax files.
- Appraisals and receipts for valuables: Keep until item(s) are sold.
- Utility bills: Keep for 1 year, unless needed for tax files.
Paper vs. electronic. In terms of what you can access electronically, keep in mind that many financial institutions only make a limited number of your statements available online. (The last 12 months, for instance.) My advice: Every six months, download a copy of your credit card statements to a folder on your computer. Use CutePDF to make a PDF of your online statements, if necessary. Voila—no paper trail. (In a pinch, you could probably order old statements from your bank, but sometimes that costs money, which isn’t as much fun.)
Tech tip: Use a service like Dropbox to back up your electronic financial files.
Documents you should keep in physical form, no matter what: Birth certificates, marriage licenses, passports, social security cards, wills, estate plans, etc. (You get the idea.)
Got questions about other financial documents? Ask me in the comments.
