Get Rid of Outdated Documents

 

 

Your documents

As you make financial and life decisions, you generally create a paper trail. From mail to confidential documents to receipts, it can be difficult to keep it all organized. And then there’s the matter of knowing how long to keep important papers and how to properly dispose of old documents to keep your information safe. Use the guidelines below and start clearing your home inventory clutter.

Shredders were invented for just such an occasion.

Open your file cabinets and take a stroll down memory lane. Still got the purchase agreement from the car you bought back in 1996? Bank statements from the Dark Ages, before you switched to digital documents?

Some things should never be destroyed. Among them are wills, titles, deeds, contracts or paperwork with raised seals, such as birth certificates. Scan these and store them digitally, and put the originals in a safe, fireproof location.

Bills and documents you can shred after one year

Keep the following for the short term: 

• ATM receipts and bank deposit slips: And confirm that they match the information on your online accounts or monthly statements. 
• Bank statements: Hold on to them until tax time and then keep for three years if they include tax-related expenses. 
• Credit card receipts: Discard them after a purchase shows up on your statement unless you need them as records for taxes or as proof of purchase in case you need to return an item or make a warranty claim.
• Pay stubs: Save them until you reconcile them with your W-2 form and yearly Social Security statement. 
• Quarterly investment statements: File them until you can verify the information against year-end summaries. (Annual statements should be kept for three years.)
• Utility bills: Keep them longer (three years) if you need the bills as a record of business deductions for tax purposes. 

Documents to keep forever (Never shred these)

Hold on to these documents in perpetuity:

• Birth and death certificates 
• Marriage licenses
• Divorce papers 
• Life insurance policies 
• Social Security cards 
• Wills and living wills 
• Estate planning documents 
• Military discharge documents 

The best way to properly dispose of documents that contain your personal information is to shred them before discarding them. If you don’t own a paper shredder, check for community shredding events near you 

Bills and records to keep for three years or longer

Follow these guidelines:

• Income tax returns: Most IRS audits involve returns filed within the past three years. The IRS could add years, but they don’t often go back more than six. Digitize your returns and shred the paper versions.
• Car title: Keep the title until you sell the vehicle. 
• Records of selling a house: Keep the documents for three years after selling. 
• Loan documents: Save the final statement showing the balance paid in full for seven years.

Home improvement receipts

If you owned your house for many years and sell it, you may have a big profit and have to pay taxes on part of the gain. To reduce your taxes, you’ll need to show the money you have spent to improve the house. For now, all deductible from the cost of the sale. Keep all the receipts for improvements, dating back to the first year you owned the house.

After the sale of the house, report the sale on your tax return and continue holding that paperwork for another three years.

But if you’re a typical taxpayer reporting your income and doing things the right way, three years is your answer.

Whatever your situation, though, digitize your documents and store them cheaply and safely in the cloud. Then, you won’t have to worry about them burning up, getting lost, getting eaten by mice or anything else. And you won’t have to worry about how long to keep stuff.

Note: Some paperwork should be kept updated, especially if it has to do with estate planning. For example, things may have changed — an inheritance from your parents, or grandchildren being born.  In addition, if you wrote your will some time ago, it’s time to update it with a lawyer.

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