Financial records: What to save and what to toss

May 01, 2012 1:42 AM by
Posted in Living / Money and finance / Budgeting & Saving
Woman shredding paper

Save it or shred it

Are old receipts and bank statements taking over your life? Without an understanding of which financial records to keep and which to toss, you run the risk of becoming a document hoarder -- or worse -- coming up empty-handed when you've scrapped important records. Unearth your jumbled heap of papers, and get ready to organize! Here's the lowdown on what to save and what to shred.

atm receiptsATM receipts

Don't let these little guys pile up. You can dispose of them monthly, after checking against your bank statement. Make sure you use a shredder to safely dispose of these and other financial records.

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Tax returns and supporting documentation

The IRS has three years to challenge your tax returns, so you must keep them at least that long. It's wise to keep tax returns for at least six years, because if the IRS suspects you may have under-reported income, it has six years to challenge returns.

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Pay stubs

Save your pay stubs until the end of the year. That way, when you get your annual W2 form, you can reconcile your pay stubs against the W2. After that, you can safely dispose of your stubs by shredding them.

Bills

Save your ongoing bills such as utility bills or cable bills for one year. This way, if you find a problem, you will have the documentation needed to resolve the discrepancy. After a year, shred away.

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Bank statements and credit card statements

Save your bank statements for one year, unless you plan to apply for a mortgage or car loan in the near future. If this is the case, take personal finance expert Suze Orman's advice and "hoard two years' worth of bank statements." The same timing applies to credit card statements.

Investment statements

Keep the most recent monthly or quarterly statement for your investments. Hang on to any record of trades for three years, so that you have them for tax purposes. Additionally, Suze Orman has this advice: "For nondeductible contributions to a traditional IRA or conversions to a Roth IRA, save the IRS form 8606 you filed when making the deposits. When you withdraw during retirement, it will be a piece of cake to prove you've already paid the taxes."

Documents to keep

Documents like wills, birth certificates, death certificates, estate planning documents and marriage certificates should be kept forever. Find a safe place to store these documents because they're with you for life.

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Comments

Comments on "Financial records: What to save and what to toss"

Thomas May 23, 2012 | 10:37 AM

The conversion of everything from paper to electronic is making it easier to avoid becoming a paper pack rat. I've gone paperless with my bank, utility and telecom statements, and my tax returns are even stored electronically with the website I use to e-file. Usually, companies that provide the convenience of electronic records follow the time rules laid out in this article and will automatically dump your old records after a certain date. It certainly makes it easier to stay on top of things and have more free time to enjoy.

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