By Mitch Adel
The familiar expression “out with the old, in with the new” definitely does not apply to your financial records. The reality is much more complex. Keeping every scrap of paper and every digital file can be overwhelming, not to mention the threat of identity theft that comes with keeping financial records. Of course, no one wants the headaches and frustration (not to mention the potential costs) that can result from accidentally disposing of, or deleting, key files. Some records can be discarded after a relative- ly short time, while others need to be conscientiously kept for, well, forever.
While it is always a good idea to consult with a trusted financial planner, wealth management professional or elder law attorney to discuss your record-keeping strategy as part of your larger financial and legal plan, there are a few basic guidelines. Here are some general tips on how long you should keep some of the most common types of financial records:
• Bills: If you pay by check or credit card, you can discard bills once they are paid and the corresponding bill payment shows up on your reconciled bank or credit card statement; the only other reason to keep them is for tax deductions.
• Bank Records: Permanently if related to taxes, home improvements & mortgage payments; otherwise, your bank keeps copies of your statements.
• Tax Returns: Keep for seven years, or longer if you owe additional tax or have another type of outstanding claim.
• Paycheck Stubs: Pay stubs contain a lot of personal information so it is wise to shred them soon, unless you are planning to apply for a mortgage or loan in which case two months of pay stubs is the standard.
• Brokerage Statements: Until you sell the securities
• House/Condo Records: Permanently
• Credit Card Receipts: Keep until you reconcile with your statements, then keep for three months.
• IRA Contributions: Permanently
• Retirement/Savings Account Statements: Keep monthly or quarterly statements until the end of the year; keep annual statements permanently.
Of course, keeping your information is one thing; keeping track of your information is another challenge altogether. The first and most important step toward getting your financial house in order is keeping your financial records in an organized, manageable, and accessible system. While there is no one magic method, there are some key tips that every good financial filing system should incorporate:
First and foremost, keep all of your important financial documen- tation in one safe, secure central location. Use a simple system to file and organize that information (a system based on categories of documents, dates, or other straightforward and user-friendly criteria). Any logical system is fine, as long as you are clear and consistent. Obviously, the logistics of maintaining your financial records will be very different if you keep hard copies versus if you keep most of your information on a computer, but the organizational principles should be very similar. Basic time-tested strategies such as color-coded file folders or clearly labeled digital folders can go a long way towards keeping your important materials organized.
“It is always a good idea to consult with a trusted financial planner, wealth management professional or elder law attorney to discuss your record-keeping strategy as part of your larger financial and legal plan.”
To limit clutter and confusion, be sure that you take the time to understand which documents are important and which can be shredded. Documents that are available online or easily duplicated/ obtained might not need to be kept. Reference the guidelines above for general guidelines about how long you should keep various financial documents, and, where applicable and appropriate, keep up-to-date information and discard outdated documents.
Balance security and accessibility
It’s critical that we keep our documents in order and in a safe and secure, but accessible, place—somewhere where we are not the only ones that know about it—in case of an emergency or a situation where someone else may need to view/acquire them. This has become increasingly complicated as we go paperless and more and more of this information lives online and security measures like passwords can throw a wrench in the works. You might want to think about putting irreplaceable documents in safe and secure places such as a safety deposit box or fireproof safe, and making digital backups when possible is also a good practice. Whatever security measure you take, make certain that your loved ones know where your information is and how to access it in your absence.
Dispose of documents securely
Shred, Shred, Shred!!! That is the key. Make sure that no information is available to your local identity thief. Some banks and libraries offer a free shredding day as a community service. If this is not available in your area, you can buy a small shredder or simply cut them into very, very small pieces.
What’s the password?
Today digital storage is an increasingly popular and convenient option. All too often, however, the security of password protection becomes an unnecessary hassle if family members need to access important documents. This can be particularly urgent if you become sick or incapacitated, and obviously in the event of your passing. Make sure that trusted family members know how to access your passwords in an emergency.
DISCLAIMER – Every case is different because every case is different. This blog does not give legal advice. This blog does not create an attorney client relationship. You are not permitted to rely on anything in this blog for any reason. This blog is an entirely personal endeavor. Every person's situation is different and requires an attorney to review the situation personally with you. No attorney-client relationship is created by this site. The use of the Internet, this blog or email for communication with this firm or any individual member of this firm does not establish an attorney-client relationship. Before we represent any client, the client and the attorney will sign a written retainer agreement. If you do not have a written, signed retainer agreement with us, we are not representing you and will not be taking any action on your behalf.