Spring Cleaning

Spring Cleaning for Your Finances

The arrival of spring is not only a perfect time to deep clean your house, it is also a great time to organize and de-clutter. This spring, I am focusing on the paper clutter in my house. Even in this digital age it seems that we still accumulate a ton of paper between mail, work and school. It can easily pile up and become difficult to know what to keep and what to toss. There are many categories of paper that can clutter a home, but I am going to focus on getting the financial files in order.

Keep forever

Certain items need to be kept permanently and in original form. For example, birth certificates, death certificates and health records. These are best stored in a physical filing box or cabinet – preferably fireproof and with a lock. Estate planning documents and other legal documents would also go into this type of storage. In general, keep indefinitely any documents that would be difficult or impossible to replace. If you’re lucky enough to have a defined-benefit retirement plan, these papers should be kept indefinitely as well.

Keep for Seven Years

Tax returns and back-up information generally need to be kept for three years after filing, although there are some exceptions. To be safe, it is good practice to keep tax returns and back-up seven years after the filing date. Also, you will want to keep records of property purchases and improvements for seven years after the property is sold for capital gains records. In addition, before discarding any W-2, reconcile the income to your Social Security Statement to verify earnings have been reported correctly.

Other Items

Receipts can be discarded once they are reconciled with the monthly statement. For household appliances, furnishings and big ticket items, keep the receipt with the warranty information while you own it. Bank and Investment account statements can be reviewed monthly and filed electronically, although you can shred/delete the monthly or quarterly statements after reconciling with the annual statement. Most of these are already stored online with the bank or investment company and can be easily accessed if needed. Same concept applies to paystubs – discard them once they are reconciled to the year-end W-2. Keep insurance paperwork while the policies are in force.

With the exception of the “keep forever” items, most of these documents can be scanned and stored electronically to cut down on paper clutter. Electronic storage works particularly well for items you already receive in digital form. For electronic storage, make sure it is secure and password protected. Also, be sure to regularly back-up the files to a separate device or to the cloud. This certainly doesn’t cover all the paper clutter we deal with, but hopefully this will help you become more organized this spring.

IMPORTANT DISCLOSURE INFORMATION

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