We get this question all the time.
Of course, the "Murphy's Law" answer is "one day after the day you sent them through your shredder."
Even in a "paperless" world, it seems we are drowning in more and more paper every day.
Some paper, like junk mail, is easy to toss.
But what about financial records? How do you play pitch and keep with them?
According to USA Today, the easiest way to stay on top of your finances is simply to "stay on task."
Its recent article, titled "Drowning in bank statements, etc.? Here's what you can toss," advises you to pay your bills, file your taxes, and save.
Doing so puts you in the best position to achieve almost any goal over time. But even if you are organized when it comes to sending the checks out each month, you can still be overwhelmed by the volume of paperwork you get back in the mail.
Good news: You do not need to retain many of the documents you receive for tax or legal purposes.
Here is a quick rundown:
Bank Statements and Bills.
Pitch'em. There is no real long-term need to retain them beyond a year or two. In fact, if you ever need to access any of these records, they most likely will be readily available from the institutions.
Tax Stuff.
Tax-related financial documents are a horse of a different color. Why? In the event of an audit, you will need all the forms and supporting documentation from the tax year under scrutiny just to prove your return was accurate.
The IRS says you should keep all your tax documents for at least three years. What is included? Your W-2s with your income for the tax year and your Form 1098 mortgage interest statement for starters.
If you have a claim for a loss from worthless securities or bad debt deduction, the IRS recommends you keep those tax documents for up to seven years. After seven years, the only reason to hang onto tax documents is if you have not filed a return at all or if you filed a fraudulent return, according to IRS record-keeping guidelines.
Hey, if that is your situation, then you have bigger concerns. Ask Willie Nelson.
In this instance, the old adage "Better Safe than Sorry" (hanging on to years and years of documents) may create more problems than shredding the documents.
With all of those financial records lying about there is a potential risk of identity theft or fraud, especially if such sensitive data falls into the wrong hands.
All that noted, some documents and records are too important to keep only in a file cabinet or even as an electronic record.
These documents and records are darn near irreplaceable or a major pain if they can be.
So, what are they? Think property deeds, tax paperwork, estate planning documents and pension plan documents, and passports. This is not an exclusive list, but they should be kept in a bank safe deposit box or fire-proof safe, to include high-quality gun safe.
If those are the must-keep documents and records, then which are the can-pitch documents and records?
Basic rule of thumb: If a document is available online, then you can ditch your hard copies. These include bank account statements, credit card bills, quarterly investment statements, and utility, cable, and phone bills.
Then again ....
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
Reference: USA Today (December 21, 2015) "Drowning in bank statements, etc.? Here's what you can toss"
Comments