During tax season and the inevitable search for financial records, some of us were frantically searching for that one piece of paper we just couldn’t find, and others had everything organized and ready to go. No matter which camp you found yourself in, now that tax season is over, spring is a great time to get organized and reduce paper and e-clutter. One of the best ways to tackle this project is to do it all in one shot. Gather all your important papers and begin sorting!
- Your “keep forever” pile should consist of marriage licenses, divorce decrees, social security cards, birth certificates, wills, adoption papers, death certificates, powers of attorney/health care proxy records, diplomas, trust documents, and deeds. Go out and finally get that fire-proof lock box and store in a safe place.
- Next, the “hold while active” pile should include insurance documents, contracts, property records, stock records, pension and retirement plan information, home improvement records, vehicle titles, appliance manuals, family health and vaccination records, and receipts for items under warranty or large purchases. Password lists, household inventory lists and photos for insurance purposes should be updated as needed and kept in the locked box.
- Inactive files that can be shredded include old vehicle registration papers, inactive insurance policies, expired warranties, old appliance manuals, and receipts for large purchases that have since been sold or discarded. Don’t skip the shredding step! There are still identity theft cases that begin by thieves searching through dumpsters for paper, even paper ripped in pieces. Small desktop shredders can be purchased for as little as $20-$30, cross-cut shredders can be purchased for $150 and up. Many towns also hold community shredding events.
- Some documents need to be kept on a rotating basis-- keeping the new and discarding the old. The “shred soon but not yet” pile should include bank statements, credit card statements, and cancelled checks. These can all be kept for one year unless needed for tax purposes, then keep for three years. Utility bills should also be stored or saved on your computer for one year in case there are billing issues or accidental overage charges to dispute. The same applies to pay stubs-- keep for one year and check them against your year-end W2. Hold onto medical bills until one year after being paid in total. EOB’s should be kept for one year as well, unless you have a serious medical condition and/or are claiming medical deductions, in which case it’s recommended to keep for seven years. Records of satisfied loans should be held onto for seven years past the final paid date.
- Tax and investment records: monthly and/or quarterly investment statements can be shredded or deleted off your hard-drive after the annual statement is received, and keep the annual statement for three years after you sell any investments. Stock certificates, records of gains/losses, and trade confirmations should be kept while active and for three years after a sale, for tax purposes. Tax records and supporting documents should be kept at a minimum of three years. Those who suspect a tax dispute, have had one in the past, have complicated filing situations, or who are self-employed should keep records for seven years. Not sure? Keep for seven years just to be safe.
- To reduce paper clutter even further, many of these documents can be accessed online and therefore, duplicate paper statements do not need to be stored at all. Vehicle policy documents, bank, credit card, investment statements, utility bills, and even appliance manuals, can be found online with the option to be downloaded to your computer or cloud storage. Forgot to download and save? Most companies offer look-back periods for retrieving those documents, check with your bank, etc. for more specifics. E-clutter can pile up as well, so do a periodic review and delete old files as necessary. An exception to this rule is life insurance documents, as they are usually only available in paper format.
- Finally, sort and file in a way that makes sense to you, and rest easy knowing that your household records are organized, accessible, and safe. Next year, when tax season arrives, think how easy it will be!
Until next time,
Diana Lormand, FPQP™
Director of Client Services
Baldrige Asset Management LLC is registered as an investment adviser with the SEC and only conducts business in states where it is properly notice filed, or is excluded or exempted from registration requirements. Discussions on our blog do not involve the rendering of personalized investment advice, but are limited to the dissemination of general information. A professional advisor should be consulted before implementing any strategy that may be suggested. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.
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