Organizing your financial records is an important part of spring cleaning, but deciding what to keep and for how long can be challenging. From bank documents to pay stubs, utility bills, tax records and more, organizing your financial records doesn’t have to be stressful. Make tax time easier with a few simple guidelines for organizing and maintaining your digital and paper files.
‘Tis the season for deep cleaning, decluttering, and storing away winter clothes in anticipation of warmer temperatures to come. In fact, according to the 2018 ACI National Cleaning Survey, 76% of Americans participate in spring cleaning each year.
But spring cleaning isn’t limited to scrubbing the floors or washing the windows. Have you considered the benefits of organizing your financial records as well?
Understanding how to organize, maintain and dispose of your records is critical to healthy finances and safeguarding your personal information. Not only will tax time be easier, but your spouse and other family members will be able to locate important information should anything unexpected happen to you.
From utility bills and financial statements to tax records and receipts, it may be difficult to determine what you should keep and for how long.
The following guidelines may help you organize your records:
Destroy checks that have no permanent importance, but keep copies of checks or statements related to your taxes, business expenses and housing and mortgage payments. If audited by the IRS, you’ll need bank statements for up to three years.
Keep paycheck stubs until the end of the year to cross reference with your W-2s to ensure they match.
Throw out (unless you need them for tax purposes).
Generally, keep records for at least three years from the date you filed your original return or two years from the date you paid the tax – whichever is later. Most experts recommend destroying these after six years. Keep copies of the tax return itself indefinitely.
Life Documents and Major Financial Events
This can include birth certificates, marriage certificates, diplomas, divorce decrees, military records, legal filings and inheritances. Store in a safe deposit box indefinitely.
Records of Loans That Have Been Paid Off
Retain for seven years. This includes car loans, student loans and personal loans.
Insurance Documents, Active Contracts, Property Records or Stock Certificates
Keep these items for the life of the policy or until the contract is complete. Homeowner Records Save the deed and title to your house indefinitely. If you plan to sell your home, keep receipts for any home improvements (if applicable) for seven years. You may need these receipts to lower the taxable gain when you sell.
Life and Estate Planning Documents
Keep the most current copy.
Receipts for major purchases such as furniture and electronics should be kept as long as you own the item. For anything you might itemize on your tax return, keep these receipts for three years with your tax records. Save receipts for medical expenses for one year to show proof of doctor visits and medical claims.
Properly Dispose of Paper Documents
To protect your identity and prevent fraud, make sure to properly dispose of any paperwork with your personal information on it. Using a shredder can be an effective way to safeguard your information.
Consider Paperless Options
Avoid clutter and save space in your filing cabinet by considering paperless statements and documents. Johnson Financial Group clients can easily manage paperless statements and documents using Online and Mobile Banking.
Protect Your Information
Create a list detailing where your records are stored and how to access them. Hide the list in a secure place or with a trusted family member or friend, and be sure to keep a copy. Reference each type of account, the identification number and the contact information for the individual to get in touch if necessary. This also pertains to any electronic records you may have.
For electronic records, make sure you store your information – including your account numbers, login IDs and passwords – in a safe place, such as a password-protected folder on your hard drive. For more information on protecting your information, visit our Security Tips page.
Happy spring cleaning!