Financial Planning: How long do I keep this?

Posted on December 7, 2011


I know this blog is about Islam but this is something I had to post. I am an accounting & marketing major and I have a sweet spot in my heart for financial planning. Call me weird, but I love it, but then again I love excel and organizing accounts too lol. I broke this up into two parts to make it smaller lol.
If you missed part I read it here. I am going to make another post with some great documents to help you get started.

Now, there are a lot of good reasons to have a plan for keeping track of your important papers. If you’re meeting with a financial adviser or an attorney, it might take you an hour to prepare instead of a week. If there’s a fire, flood, or theft, you’ll be able to find essential documents without delay. If something happens to you, your loved ones will be able to readily locate your health-care power of attorney, insurance policies, medical records, and outstanding bills. Even on an everyday basis, good record-keeping makes it easier to pay bills on time, find receipts, and reduce tax-time anxiety.

Even if you dread it, getting your financial papers in order helps lower stress in your life.  All you have to know is how long to keep your records and where they should be stored.

Tax season is the perfect time to start tackling the paper piles .The act of filing (or gathering your information for a tax preparer) forces you to become reacquainted with your finances. You can divide nearly all of your financial records into four categories: papers that you need to keep for the calendar year or less; ones that can be destroyed when you no longer own the items they cover; tax records, which you should save for seven years; and papers to keep indefinitely.

To help avoid identity theft, shred anything you plan to throw away that contains personal data. Look for a crosscut shredder rather than a strip one, which leaves long paper bands that could be reassembled. You can keep all of these documents in a file cabinet.

Keep for a year or less

Bank records
Keep deposit and ATM receipts until you reconcile them with your monthly statements. File your monthly checking and savings account statements. After you do your taxes, file any statements needed to prove deductions with your tax records; the rest can be shredded.

Credit-card bills
You don’t need to keep them after you’ve checked and paid them, unless you need a bill to support a deduction you’ll be taking on your taxes, such as for a charitable donation (in which case you’ll need to file the bill with your current-year tax records). If an item you’ve charged is under warranty, keep the bill until the warranty expires. Staple the credit-card bill to the warranty document and put it in a file with other warranties; you may need the bill as proof of purchase if the item needs repair.

Current-year tax records
Keeping your records organized can save you headaches and money at tax time. Tax preparers might charge more if you give them a disorganized shoe box full of papers. Place documents you’ll need for your next return in a file. If you need to save a lot of receipts and bills, use a standing accordion file.

Insurance policies
Keep policies that you renew each year, such as those for your home, apartment, or car, until you get new policies, then shred the old ones.

Investment statements
You can shred your monthly and quarterly statements from brokerage, 401(k), IRA, Keogh, and other investment accounts as new ones arrive. But hold on to annual statements until you sell the investments. You may want to have separate folders for traditional and Roth accounts to help you keep track of amounts that are deductible and non­deductible for tax purposes. Better yet, sign up for electronic statements if your financial institutions offer them.

Pay stubs
Keep the calendar year’s records until you reconcile them with your annual W-2 form, then shred them.

If you’re not doing anything with your receipts—like tracking your spending, itemizing tax deductions, or using them to return purchases—you can get rid of most of those little scraps of paper immediately. If you need to keep them on hand so you can verify amounts against your credit-card bills or bank statements, create a folder labeled “receipts” and keep it with your bills-to-pay folder. That way you’ll have your receipts handy when you pay your credit-card bills. If you think you might return something, ask the sales­person how long you have to decide, and jot down the date on your receipt.

Keep for a limited time

Documents relating to investment purchases, loans, and other items that expire or are sold can be stored in an out-of-the way file cabinet. But try to go through them once a year and toss out papers as detailed below.

Household furnishings paperwork
Keep receipts, warranties, and, while you’re at it, instruction booklets for major appliances and electronics. You can get rid of a warranty when the period it covers has passed, and the rest of the material when you no longer own an item. Ditto for canceled receipts and bills for major purchases such as furniture.

Investment purchase confirmations
You’ll need these to establish your cost basis and holding period when you sell the investments. If this information appears on your annual statements, you can keep those instead. Store the records in your file cabinet until you sell the investments, at which time you should move the back-up records into that year’s tax-return file.

Loan documents
Keep closing documents for mortgage, vehicle, student, and other loans in a safe-deposit box. You can get rid of them after the loan is paid off.

Savings bonds
Hold these in a secure place until you cash them in. Or you can convert them to electronic form using the Treasury’s SmartExchange program, at

Vehicle records
Keep purchase receipts, titles, and registration information in a safe-deposit box as long as you own the car, boat, truck, or other vehicle. Store the maintenance and repair records in your home filing cabinet.

Hold these for seven years

This category includes personal federal and state tax returns and their supporting records. You should keep them because your returns can be randomly audited up to three years after the date you filed the return. If you fail to report more than 25 percent of your gross income, the government has six years to collect the tax or start legal proceedings. You can be audited at any time if the IRS suspects you of fraud.

After seven years, you may want to keep just the tax returns if you’d like to track your income over the years. Keep tax records more than seven years old in your out-of-the-way file cabinet. Better yet, scan the returns into your computer and store them on a CD or external hard drive. Nearly half of the people in our survey said they kept both electronic and paper tax files, but only 3 percent stored their records only in electronic form.

Do not toss

These are permanent members of your financial paperwork family, which you may need to retrieve occasionally. Essential records such as birth and death certificates, marriage licenses, divorce decrees, Social Security cards, and military discharge papers should be kept in a safe-deposit box. Here are some other documents you should hold on to forever:

Defined-benefit plan documents
Keep pension-plan documents from your current and former employers. Store them in your file cabinet.

Estate-planning documents
Keep copies of wills, trusts, and powers of attorney in your safe-deposit box. You should also make sure your attorney and your executor have copies. It’s also a good idea to give your primary-care physician and anyone named to make decisions on your behalf copies of your health-care proxy.

Life-insurance policies
For permanent life insurance—policies that have a cash value or investment component—keep documents and a list of the companies that issued them and their phone numbers in your safe-deposit box. If you have a term life policy, hold the documents until the term is over, then toss them.

Safe-deposit box inventory
Note the location of the box and your keys, and keep a list of what you have in it. Update the list once a year or as you add or remove documents. Keep the inventory list in your out-of-the way file cabinet. You should also keep photocopies at home of any documents you have stored in the box in case you need to refer to them.

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