lize566
02-03-2008, 02:57 PM
Do you keep papers such as bills, paystubs, receipts, etc? I was going through my piles of paperwork today,trying to organize and file it all, when I wondered if I was doing unnecessary work. Plus, with tax season upon us I was wondering how long I was supposed to keep certain things. How long do you keep these things, and if you do, do you have a filing system?
Here are the rules of thumb, that I have found (the only difference I found on other websites was about paystubs-others say to keep them until you receive your W-2 for that, then verify it's correct, then toss/shred paystubs):
First, is your fire insurance up to date? And would you be able to find the policy? Huge stashes of old, paid bills, expired life insurance policies (you're still alive, right?), receipts for broken toys, and cancelled $3 checks from your college years may not constitute a true fire hazard, but they aren't doing you any good. Clear out what you don't need, and the stuff you do need will be much easier to find. You really only need to keep a small fraction of the blizzard of paper that arrives in your mailbox every month. And you don't need an elaborate filing system, either. The test of a good filing system (as far as I'm concerned) is that you don't spend more time filing than you save by having things filed. You could spend an hour every week filing every paper in a walnut cabinet, but looking through the To Be Filed pile for recent stuff just doesn't take that long -- as long as you've only piled up the stuff you really need to keep.
So here's a list of commonly kept stuff that you don't need.
Bills you've paid: Check 'em for accuracy, write the check, and toss 'em.
Pay stubs: If you are applying for a mortgage, you might need two or three stubs to prove you haven't been fired.
Advertising: Save two ways -- save space, and save the money you might have spent on that new combo Crock-Pot/salad spinner that caught your eye.
Old stuff: Some exceptions are noted below, but generally, if you are done with something, you can toss the paper work. You don't really need the receipt for that phone you dropped in the bath tub two years ago, do you?
That's a short list, but it covers at least 95% of the paper I get.
What do you need to keep? As long as you aren't sentimental about your records, here's a bare-bones plan -- the list is longer, but the pile will be shorter.
Current insurance policies: Don't keep the bills or the offers to expand your coverage -- just the policies themselves and any modifications to them. Toss policies that have expired as long as no claims are outstanding, of course.
Bank statements and cancelled checks: Keep them for seven years -- three if you like to skate close to the edge.
Brokerage statements: Everyone, including brokers and the SEC, says to keep brokerage statements forever, and that's undoubtedly the safe route. But, honestly, if you are sure the records that your broker has sent you are correct, the chances you'll need your own paper records to prove something are pretty darn slim. For taxable accounts all you really need to keep are the trade confirmation slips and notices of stock splits, mergers and buyouts, but the monthly statements work as a nice back-up if you lose one. When you sell a stock, simply match the buy slip with the sell slip and keep them with your tax records for the year you sold the stock. (You use the info on the confirmation slips to calculate your capital gains.) Year end brokerage statements will have dividend and interest information that you will need for your taxes.
You aren't required to keep records for IRA accounts. There is one exception: You need to track any contributions (not earnings, just money you deposited to the account) that were not deducted from your taxes. That means all contributions to a Roth IRA and any contributions to a traditional IRA that were made with after-tax money. These contributions aren't taxed when you withdraw them (and Roth contributions can even be withdrawn prior to retirement), but you have to be able to show that you already paid taxes on that money.
Note: Even if you don't keep every slip of paper the broker sends you, you should track your investment performance in some way. Without knowing how well you are doing, you won't know if you are making good investing decisions or not.
Terms and conditions for credit card accounts: These are loan documents. You need them. No, you don't need every monthly statement, although they can come in handy as a proof of purchase if you lose a receipt. And they definitely show you where all that money went. For budgeting purposes, try downloading your statements into a financial program like Quicken or Microsoft Money. (Just be sure to back up your files regularly.)
Terms and conditions for other loans: This includes current loans such as your mortgage and your car loan. Keep confirmation that a loan has been paid off for a year or so, and definitely keep it until you receive clear title to a vehicle or piece of real estate.
Tax records: You are required by law to keep tax records for three years, and most experts recommend seven. Each year I just put all my tax forms, W-2's, stock trade confirmations, and the receipts for all deductions into a 9 x 12 envelope and write the date on the outside. It's almost more trouble to throw them away after seven years than it is to keep them.
Real estate records: Although the laws have been liberalized on capital gains for house sales, you may still need to track the cost basis for your home (or series of homes) in case your capital gain ever exceeds $500,000. You will need the real estate transactions (buys and sells) for each house and receipts for any capital improvements you may have made. (That's big permanent stuff like a deck or addition or a major landscaping upgrade -- wallpaper and repairs won't count.) You should keep these records for all houses since your cost basis goes back to your first house purchase. For your current house, keep pre-purchase inspection reports in case the inspector missed anything.
Personal papers: Keep your birth certificate, medical records, marriage certificate, divorce settlement, and will. (Don't forget about a living will and durable power of attorney.)
Instructions, guarantees, and repair records: Yes, you should keep this stuff, along with any receipts needed to validate your guarantee. Just remember, the point of filing is to make it easy to find stuff, but not so easy that you spend an hour filing to save yourself ten minutes of looking.
Receipts for major purchases: You may may need to file an insurance claim on your big-ticket items. I wouldn't worry about normal clothes and personal effects, but receipts for jewelry, furniture, art, etc., will be very helpful if you should experience a fire, flood, or really, really bad termite attack. And speaking of fire, all of these records really should be in a safe deposit box or fireproof file.
You've probably noticed a pattern here. You keep the beginning and ending stuff, but most of the stuff in between -- the repetitious monthly junk that fills up your mail box, stretches your file folders out of shape, and can be reproduced by the company that sent it if you ask nicely -- really isn't worth the time and space it takes to file it.
Remember the Drew Carey method? Old pizza boxes on top of the fridge labeled Car, Insurance, Bank, Taxes, etc.? It's brilliant if you don't mind the roaches. Keep it in mind the next time you are tempted to color code your file folders. The purpose of filing is to make your life easier, not to prove that you are a worthy person.
Here are the rules of thumb, that I have found (the only difference I found on other websites was about paystubs-others say to keep them until you receive your W-2 for that, then verify it's correct, then toss/shred paystubs):
First, is your fire insurance up to date? And would you be able to find the policy? Huge stashes of old, paid bills, expired life insurance policies (you're still alive, right?), receipts for broken toys, and cancelled $3 checks from your college years may not constitute a true fire hazard, but they aren't doing you any good. Clear out what you don't need, and the stuff you do need will be much easier to find. You really only need to keep a small fraction of the blizzard of paper that arrives in your mailbox every month. And you don't need an elaborate filing system, either. The test of a good filing system (as far as I'm concerned) is that you don't spend more time filing than you save by having things filed. You could spend an hour every week filing every paper in a walnut cabinet, but looking through the To Be Filed pile for recent stuff just doesn't take that long -- as long as you've only piled up the stuff you really need to keep.
So here's a list of commonly kept stuff that you don't need.
Bills you've paid: Check 'em for accuracy, write the check, and toss 'em.
Pay stubs: If you are applying for a mortgage, you might need two or three stubs to prove you haven't been fired.
Advertising: Save two ways -- save space, and save the money you might have spent on that new combo Crock-Pot/salad spinner that caught your eye.
Old stuff: Some exceptions are noted below, but generally, if you are done with something, you can toss the paper work. You don't really need the receipt for that phone you dropped in the bath tub two years ago, do you?
That's a short list, but it covers at least 95% of the paper I get.
What do you need to keep? As long as you aren't sentimental about your records, here's a bare-bones plan -- the list is longer, but the pile will be shorter.
Current insurance policies: Don't keep the bills or the offers to expand your coverage -- just the policies themselves and any modifications to them. Toss policies that have expired as long as no claims are outstanding, of course.
Bank statements and cancelled checks: Keep them for seven years -- three if you like to skate close to the edge.
Brokerage statements: Everyone, including brokers and the SEC, says to keep brokerage statements forever, and that's undoubtedly the safe route. But, honestly, if you are sure the records that your broker has sent you are correct, the chances you'll need your own paper records to prove something are pretty darn slim. For taxable accounts all you really need to keep are the trade confirmation slips and notices of stock splits, mergers and buyouts, but the monthly statements work as a nice back-up if you lose one. When you sell a stock, simply match the buy slip with the sell slip and keep them with your tax records for the year you sold the stock. (You use the info on the confirmation slips to calculate your capital gains.) Year end brokerage statements will have dividend and interest information that you will need for your taxes.
You aren't required to keep records for IRA accounts. There is one exception: You need to track any contributions (not earnings, just money you deposited to the account) that were not deducted from your taxes. That means all contributions to a Roth IRA and any contributions to a traditional IRA that were made with after-tax money. These contributions aren't taxed when you withdraw them (and Roth contributions can even be withdrawn prior to retirement), but you have to be able to show that you already paid taxes on that money.
Note: Even if you don't keep every slip of paper the broker sends you, you should track your investment performance in some way. Without knowing how well you are doing, you won't know if you are making good investing decisions or not.
Terms and conditions for credit card accounts: These are loan documents. You need them. No, you don't need every monthly statement, although they can come in handy as a proof of purchase if you lose a receipt. And they definitely show you where all that money went. For budgeting purposes, try downloading your statements into a financial program like Quicken or Microsoft Money. (Just be sure to back up your files regularly.)
Terms and conditions for other loans: This includes current loans such as your mortgage and your car loan. Keep confirmation that a loan has been paid off for a year or so, and definitely keep it until you receive clear title to a vehicle or piece of real estate.
Tax records: You are required by law to keep tax records for three years, and most experts recommend seven. Each year I just put all my tax forms, W-2's, stock trade confirmations, and the receipts for all deductions into a 9 x 12 envelope and write the date on the outside. It's almost more trouble to throw them away after seven years than it is to keep them.
Real estate records: Although the laws have been liberalized on capital gains for house sales, you may still need to track the cost basis for your home (or series of homes) in case your capital gain ever exceeds $500,000. You will need the real estate transactions (buys and sells) for each house and receipts for any capital improvements you may have made. (That's big permanent stuff like a deck or addition or a major landscaping upgrade -- wallpaper and repairs won't count.) You should keep these records for all houses since your cost basis goes back to your first house purchase. For your current house, keep pre-purchase inspection reports in case the inspector missed anything.
Personal papers: Keep your birth certificate, medical records, marriage certificate, divorce settlement, and will. (Don't forget about a living will and durable power of attorney.)
Instructions, guarantees, and repair records: Yes, you should keep this stuff, along with any receipts needed to validate your guarantee. Just remember, the point of filing is to make it easy to find stuff, but not so easy that you spend an hour filing to save yourself ten minutes of looking.
Receipts for major purchases: You may may need to file an insurance claim on your big-ticket items. I wouldn't worry about normal clothes and personal effects, but receipts for jewelry, furniture, art, etc., will be very helpful if you should experience a fire, flood, or really, really bad termite attack. And speaking of fire, all of these records really should be in a safe deposit box or fireproof file.
You've probably noticed a pattern here. You keep the beginning and ending stuff, but most of the stuff in between -- the repetitious monthly junk that fills up your mail box, stretches your file folders out of shape, and can be reproduced by the company that sent it if you ask nicely -- really isn't worth the time and space it takes to file it.
Remember the Drew Carey method? Old pizza boxes on top of the fridge labeled Car, Insurance, Bank, Taxes, etc.? It's brilliant if you don't mind the roaches. Keep it in mind the next time you are tempted to color code your file folders. The purpose of filing is to make your life easier, not to prove that you are a worthy person.