You organize your cupboards, closet and basement once in a while, but how often do you schedule time to get your financial life straight? Despite our highly virtual society, there are still some financial documents that you must not only have on hand, but also be able to easily retrieve if needed. Jill Pollack, organizational expert, offers her advice for a clutter-free system on these five must-have documents.
Any government-issued/official document
This includes Social Security cards, birth certificates, passports, marriage/dissolution papers, wills, military discharges, and a copy of your driver’s license. These documents are notoriously tricky to replace. Pollack suggests keeping them a fireproof lockbox.
Keep auto title and registration documentation for as long as you own the vehicle. For property, have the title on hand when you own the property, and for seven years after it’s sold. The same holds true for accompanying loan paperwork.
Pollack suggests organizing the documents into a broadly categorized, color-based file system. For example, put all car paperwork in a blue folder and dedicate a red file to all housing documents. If you don’t have room for a proper filing cabinet, Pollack likes smaller, sturdy, clearly labeled filing boxes that stack.
ROTH IRA statements should be kept on hand until you retire to prove that you have paid tax on contributions. Keep investment records for as long as you own the securities, plus another seven years after you’ve sold them to prove capital gains and losses.
Keep these for seven years, along with all the documentation that supports each return on file. Pollack reminds that “the IRS may audit you within three years if it suspects good-faith errors; six years if it believes you underreported your income by at least 25 percent; and unlimited time if you did not file a return or filed a fraudulent one.”
Warranties/guarantees and big-ticket purchase receipts
For insurance purposes, keep a copy of the receipts from purchases that you’d file a claim for in the event of damage. Pollack advises keeping the files user-friendly so you don’t fall into the habit of a “to be filed later” pile. Instead of a folder called “flat-screen TV,” create a broad one called “electronics,” where you can easily file and find all receipts in that category.
For all these important financial documents, Pollack stresses the importance of “location, location, location.” Keep them in a well-lit, easily accessed location (not in the attic or basement, where papers “grow” and clutter tends to spread). “If the files are in a convenient spot, you are more inclined to use them and keep them tidy,” she says. Purge the documents you no longer need each year.