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What personal finance papers do I keep and what do I toss?
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Do you keep all your financial documents, or do you throw everything away? No matter what your circumstances, it is important to keep some documents and shred others. Here are guidelines to help organize your personal finance papers.
• Shred unneeded documents. This is important since identity theft is one of the fastest growing crimes in the United States. Every day we toss out papers with personal information. Identity thieves search for this information to sell or use for their own profit. To minimize your risk, routinely shred any papers that include personal identification and account numbers. This includes pre-approved credit card offers. The best shredder is one that turns your documents into thin vertical strips or confetti. You can purchase a shredder at an office supply store or large discounter for $30 to $40.
• Keep some papers indefinitely. Store these hard-to-replace documents forever- Your will. Have a back-up copy filed with your attorney.- Birth and death certificates, marriage licenses, prenuptial agreements, alimony and child-custody agreements, divorce decrees, adoption papers, military records, citizenship papers and passports.- Your health care power of attorney, which gives someone you trust legal right to make medical decisions for you if you become incapacitated.- Copies of your IRA and 401(k) participation plans. These forms, not your will, determine what happens to the money in these accounts when you die. If you haven't kept copies of the forms that name your plan beneficiaries, contact your IRA or 401(k) custodians. Keep your beneficiary names and addresses current.- All current insurance policies home, health, disability and auto.- Deeds, property titles, mortgages, stock and bond certificate sand employment contracts.- Store these important documents in a safe deposit box at the bank or in a fireproof box in your home. Large fireproof boxes are available at office supply and hardware stores for about $100. The fees for a safe deposit box can range from $10 to $75 a year, depending on the size of the box. If you choose to rent a safe deposit box, make an inventory of the contents and put the list in your financial notebook or permanent file at home.
• Store these documents for at least seven years in a file cabinet at home or in multiple file boxes. These are considered long-term files.- Income tax returns, both state and federal, and supporting documentation. Supporting documents include receipts for business expenses, charitable contributions, casualty losses and cancelled checks for any other tax-deductible expenses. Usually tax returns will be audited within three years. In some instances an audit may be held six years after the return is filed. Therefore it is wise to keep tax returns and supporting papers for seven years. If you haven't kept copies of recent federal tax returns, you can buy them from the IRS. Tax returns often contain information about earnings and assets that you may need. To obtain tax forms, send form 4506, "Request for Copy or Transcript of Tax Form" to the Internal Revenue Service, P.O. Box 9941, Photocopy Unit, Stop 6734, Ogden, UT 84409. The cost is $23 for one year's return.- Wage and salary records and annual payroll check stubs.- Cancelled checks, bank statements and savings account records.- Monthly statements including information from the bank, brokers, mutual funds, 401(k) and other retirement plans, individual retirement accounts (IRAs), Roth IRAs and 529 college savings plans. Staple multi-page documents to keep them together in the file.- Automobile, truck and farm machinery titles. When you sell, give maintenance records to the new owner.- Guarantees and warrantees. Write the date and place of purchase on the guarantee or warrantee. Keep records of all repairs.- Keep documents showing improvements to your house. These records can help in the case of a dispute over damage from flood, fire or other disasters and can help the insurance company cover your losses.
• Store these documents in a file cabinet or file box for up to three years. These are considered short-term files.- Papers that confirm the selling or buying of stocks, bonds, etc. Discard quarterly statements once you receive the year-end statement.- Pay stubs. Keep monthly stubs to match your year-end statement, then shred the stubs. Keep year-end stubs for at least three years.- Credit card statements. These may list tax-deductible expenses or charitable gifts. If so, keep those with your tax papers. If not, shred at the end of the year.- Utility and telephone bills. You may shred as soon as they are paid, or keep them for financial records. When selling or renting property, tenants may want to review recent utility bills.- ATM receipts/deposit slips. As soon as they appear on the bank statement, shred.- Medical bills. Hang onto these for a year in case you have a dispute over a reimbursement or you are billed for something you have already paid. Shred unless they support a tax deduction, in which case, file with your tax documents.
• Plan for a yearly overhaul. Even the best record-keeping system won't fill your needs forever. Changes in employment or lifestyle require adjustments in record keeping. At least once a year, review your files and clean them out. January is a great time for a record-keeping overhaul since tax time requires you to look at your financial picture.
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- I'm almost 40 yrs old, & I want to put a aside some extra $ for retirement. I'm a novice when it comes to investing, & could sure use some advice. For my retirement, I presently have 26K in an traditional IRA, 6K in a Roth IRA, 5K in a Universal Life Ins policy (that I'm in the process of canceling), 26K in a SEP IRA (that my employer is not longer contributing to), & 15K in a YMCA Retirement Fund. 78K total. I max out contributing to my Roth IRA. My SEP/IRA & YMCA Retirem't Funds are employer contribution only. Last year I was talked into the opening the above mentioned "Flexible Premium Universal Life Insurance w/ Indexed Feature." Much to my surprise, at the 1 yr mark of that account, I had 30% less than I contributed due to "expense charges." I'd like to put aside about $500/mth, in a relatively safe savings/investing vehicle. Any guidance would be truly appreciated, & is much needed.