Financial Management: What To Keep And What To Toss
Posted on June 24th, 2011
Managing your own finances can result in massive piles of paperwork that have to be cataloged, reconciled, and filed away for safe keeping. Although many people tend to keep everything associated with their financial life, some of the items that they are filing away can be tossed into the garbage, as they are no longer useful. Following some simple tips for what to keep and what to throw away can help you declutter your financial life and reduce the amount of time you spend on financial management.
Toss Anything That Can Be Obtained Electronically
Many types of financial statements can now be obtained online or stored on a computer, reducing the need to keep thousands of pieces of paper with financial information on them. Keeping electronic versions of these documents has become so common that the IRS now accepts electronic records. Most companies provide online access to statements and payment records for free, so be sure to inquire about policies for obtaining these documents and the length of time that the documents will be stored.
Magic Number 7
Any important documents related to your finances should generally be kept for seven years, as this seems to be the magic number for many different types of financial institutions. The IRS can audit your tax return for up to 7 years after the information has been submitted, although audits typically occur within the first three years of filing. Credit reporting bureaus keep most financial information in your credit history for 7 years, after which the information is erased from the record. Filing information about debts, tax breaks, and major purchases for seven years will ensure that the records are available if needed by some type of financial institution.
Items To Keep Longer
- Tax Returns – actual tax returns should be kept in a secure location indefinitely in case you or your heirs need to access the information contained within them.
- W2 Forms – these forms should be kept until the individual listed begins drawing social security.
- Asset Documentation – documentation about assets purchased, such as stocks, houses, or home improvements, should be kept as long as the asset is owned by the individual and then for 7 years after.
- Year End Loan Summaries – these summaries documenting loan payments should be kept until the loans are paid off and the final notice showing that the loan has been paid off should be kept indefinitely.
- Personal Documents – important documents related to your personal life, such as birth certificates, death certificates, marriage certificates, divorce papers, and military discharge papers should be kept for life.
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Tags: Keep, Keep Toss
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