Keeping Your Financial House In Order

I was asked by a friend recently to post an article about what financial documents to keep and which ones not to keep.  She said every month she finds herself at a dilemma of what to keep, to shred or to recycle.  I hope to give you some suggestions of how to sort through the pile of papers sitting somewhere in your house right now.

My first suggestion is to buy a durable shredder (do not buy a cheap one or you will regret it).  The majority of the financial papers you receive will need to be shredded.  If it has any type of personal data or information on it the rule is SHRED IT!

Second, get yourself a box near your work space that you can throw all of the magazines and newspapers that don’t need to be shredded into a recycle box.  (Here in Broken Arrow, OK we have paper recycle dumpsters all over town which makes it easy to recycle newspaper and magazines).

Next, you will want to go to www.homefile.com (site is down as I write this blog) and purchase their Financial Planning Organizer Kit.  (I give this to my new clients and we have a meeting where I specifically teach them how to use it.)  This kit is awesome and you will not regret purchasing it, especially if you are a “piler” when it comes to your financial papers.  In our house, I have implemented this system and my wife and I now call it the “love box.”  It has that name because it is an act of love to your spouse or loved ones in the event something devastating were to happen to you.  Let’s say you do not make it home from work today, who in your family knows where all your important papers and documents are located?  If you love them, you will put these documents together for them.  (If you don’t even know, how will anyone else know?)  The Financial Planning Organizer Kit will show what important papers to keep, where to keep them and for how long.  (Unless you have a special attachment to them, you do not need to keep your tax returns for over 20 years like one of my clients has done.)

I often get asked how long you should keep monthly bills after you have paid for them and they have cleared the bank.  My suggestion is to keep them for about 12 months.  If it is August, then I think it is okay to throw away the August utility bill from the previous year.  This is where having a good scanner might come in handy.  You can either scan your monthly bills as PDF and file them onto your computer (of course I recommend a back up system) or receive electronic copies from the company itself and then file it as well.  I find that if you do need to get a copy of your bank statement or a utility statement then the company generally can provide that information to you very easily.

Below you will find the amount of time you should keep selected financial documents:

1. Car Registration and Maintenance Logs:  For the amount of time you own the vehicle

2. Monthly Bank Statement:  You will want to archive these after you file your taxes for that year.  I make a 3-ring binder each year and each time we get a bank or investment statement I paper punch the statements and then put them in the binder.

3. Loan Payments:  Can be destroyed after loan is paid in full

4. Paystubs:  After you receive your W-2 for the year

5. Life Insurance:  For as long as you have the policy

6. Disability Insurance:  For as long as you have the policy

7.  Investment Accounts:  Keep monthly or quarterly statements until you have filed your tax return and you have made sure you or your accountant did not miss any investment-related deductions.

8. Tax Returns:  The rules for keeping tax documents can be found at ftp.irs.gov/businesses/small/article/0,,id=98513,00.html

I hope these suggestions help you some.  This is definitely by no means a comprehensive list.  The best advice I can give you is to create a simple system that is easy for you to use and follow it regularly.  Try not to make your filing overly complicated because you have much more important things to worry about in your daily life.

About the author

Kevin F. Jacobs, CFP®, EA

Kevin Jacobs, the founder of Step By Step Financial, LLC, has been a recognized CFP® practitioner since 2008 and has been in the financial services industry since 2005. As an Enrolled Agent (EA), Kevin is also licensed to practice before the IRS. Before 2005, he served as a youth director in Memphis, TN. Kevin and his wife, Donella, have seven children (5 boys and 2 girls). They are active at their church and Kevin is also very involved in the community of Broken Arrow.

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