Financial documents: What to keep and when to toss.
Is your kitchen table buried under mounds of receipts, statements, bills and other paperwork? Do you hang on to everything because you’re not sure what you should keep — and for how long? If the answer’s yes, use the guidelines below to start clearing the clutter and getting organized before the new year and tax time roll in.
Things to keep for one year or less:
For daily and monthly purchases and account activity, save things like receipts and pay stubs until you can reconcile them with larger financial records, like your credit card statement or taxes.
- ATM receipts and bank deposit slips: Make sure they match the information on your monthly statement or online account, and then toss.
- Receipts for everyday purchases: Discard once the purchase shows up in your bank or credit card statement and once you’re sure you won’t need to return the item.
- Bank statements: Generally keep these for one year. However, if a statement reflects a tax-related expense, hold on to it until tax time (see below). Then, save annual statements for seven years.
- Pay stubs: Save until you reconcile them with your W-2 form (or 1099 if you’re self-employed). Consider keeping a few months of recent pay stubs on hand if you expect to apply for a large loan, such as a mortgage.
- Utility bills: Discard once you receive the next bill showing the bill has been paid. Keep for longer only if you need the bill as a record of business deductions for tax purposes.
- Monthly/quarterly statements: Generally, at the end of the calendar year, you can discard monthly and quarterly statements — such as for your mortgage, credit card or investment accounts — after verifying the information against year-end summaries.
Things to keep for longer than a year:
For more significant, long-term purchases, you may need to file away documents for several years. Information relating to insurance, medical care, investments and retirement should also be saved for a longer period of time.
- Tax returns: Keep tax returns from at least the past three years and preferably seven. Save supporting documents, such as W-2s, 1099s, and receipts for deductible business, medical and mortgage related expenses, as well as retirement and charitable contributions.
- Home improvement records: Keep receipts and other cost-related documentation as long as you own the home so you can calculate actual sale profits, which impacts capital gains taxes.
- Home purchase documents: Save for seven years after selling your home. This might include home appraisal and inspection reports, as well as the documents you received at closing. If you’re renting, you can shred rental agreements after moving and receiving your deposit back.
- Brokerage/investment statements: Keep for seven years after you sell the last investment.
- Insurance policies: Save as long as you have the policy. If the insurer sends you a revised policy, discard the old one.
- Loan documents: Keep the statement showing your most current balance on your car loan, student loan, personal loan and so on. Save the final statement, showing your balance is paid in full, for seven years.
- Medical records: Keep doctor and hospital bills, as well as health insurance statements, for five years from the date you received the service.
- Retirement account statements: Hold on to these until you retire.
- Car title: Keep as long as you own the vehicle.
- Receipts for major purchases: Save receipts for big-ticket items — such as furniture, jewelry or computers — as long as you have the item, in case you need to use a warranty or make an insurance claim.
Keep certain personal and legal documents forever, including:
- Estate planning documents, such as wills and trusts
- Confirmation papers showing beneficiary designations
- Birth, marriage and divorce certificates, and adoption papers
- Social Security cards
- Education and military records
- Property deeds
It’s a good idea to scan and save digital copies of these documents. Then keep the originals safely stored in a locked file drawer, fireproof box or safe deposit box.
Tips for safely storing and tossing files.
To help prevent identity theft, always shred documents that contain your personal information before discarding them. In general, opt to receive electronic versions of documents when possible and save them in labeled e-folders. Otherwise, scan paper documents and save the files. Back up your files regularly on an external storage drive, USB flash drive, the cloud or a web-storage service. Keep everything password-protected.
If you stick with paper, create an organization system that you’ll find easy to follow. This could be as simple as a plastic tote box or file cabinet with labeled file folders for different types of documents.
Staying on top of filing your documents — and shredding them when the time comes — doesn’t just clear clutter. It can also help keep your overall financial life in order. And that can make everything from year-end financial reviews and new year planning to loan applications and tax returns easier than ever.