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Managing Your Financial Paperwork

If your financial filing system consists of a basket full of receipts, warranties and paycheck stubs, you may find yourself dreading tackling the pile as you do your spring cleaning. But cleaning up your finances doesn't have to be a big chore. You can do it while catching up on your DVR one evening. Not only will you put a better system into place to reduce clutter, you will also reconnect with your money and hopefully begin taking control of it.
 
Start by getting organized. Grab your files, empty that basket, pull out your bills and round up your receipts. Next sort them into the following piles: 
 
  • Receipts, paycheck stubs, bank and credit card statements and monthly bills
  • Investment statements (401k, brokerage, IRA, etc.)
  • Tax returns and the documents used to prepare them
  • Insurance policies, ownership deeds, etc.
  • Warranties, user manuals and their corresponding receipts
  • Identification documents
 
Next, place your identification documents (also called "forever docs") in a fire-proof safe in your home. This includes birth certificates, adoption papers, passports, marriage license, divorce decree, will, trust, power of attorney, death certificates and other original documents. For all of the other piles, create a folder for each and add new papers as you receive them. 
 
Some folders will then have folders within them. For example, in your folder for monthly bills, you might have a separate folder for electric, cable, credit card statements and so on. If you can, keep these files in a fire- and water-resistant safe. If that is not possible, at least keep them together in a drawer or on a shelf.
 
Then let the de-cluttering begin. Read on for guidelines on how long to keep what type of documents.
 
 
RECEIPTS, PAY STUBS AND MONTHLY ONGOING BILLS
 
Utility bills: Keep for one year, unless you claim a home office deduction, in which case they become tax documents.
 
Pay stubs: Keep for one year until you receive your W-2. As long as your last paycheck matches your W-2, you can toss them. 
 
Bank and credit card statements: Keep for two years, as you may need them when applying for a mortgage or other loan.
 
 
INVESTMENT STATEMENTS
 
Keep your monthly or quarterly statements until you receive your annual. If you make any trades, keep the trade confirmation for a purchase as long as you hold the asset and for a sale, for at least three years. If you make any non-deductible contributions to your traditional IRA or convert to a Roth IRA, save the IRS Form 8606 until you withdraw during retirement as proof that you've already paid the taxes.
 
 
TAX RETURNS AND SUPPORTING DOCS
 
Keep everything for at least three years. For questions on IRS recordkeeping guidelines, check out IRS Publication 552 at www.irs.gov/pub/irs-pdf/p552.pdf.
 
 
INSURANCE POLICIES, OWNERSHIP DEEDS, ETC.
 
Keep all as long as the policy is in effect or as long as you own your home or car. Consider placing this file in your fireproof safe as well.
 
 
WARRANTIES AND USER MANUALS
 
Save all active warranties. Toss any that have expired or for items you no longer own. Try to weed this file out on an annual basis. I like to staple the receipt showing proof of purchase to the warranty in case I need it. If you are comfortable using the Web, I recommend tossing user manuals. Manufacturers now have downloadable versions on their Web sites, so you can rid yourself of this clutter.
 
As far as ATM receipts and other receipts for purchases, you can toss these after you've checked them against your bank statement. I keep receipts for clothing until I've worn and washed the item and for household items until it has been used at least once.
 
As you are de-cluttering and tossing unneeded documents, be sure you shred them before putting them in your recycle bin. Even if it is a statement for an account that is closed, you don't want to tempt identity thieves by offering your name, address and an account number on one page.
 
Finally, once you have your important papers more organized and up-to-date, make a note to revisit your files on an annual basis to weed out those no longer needed and collect and add any new documents collected.
 

Kelley C. Long
Authored by:  Kelley C. Long

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