All you need to know to keep your papers and documents under control.
Do you ever get to the point where you just know you need to tackle the many piles of “things” around your house? The process often involves time spent sifting through old clothes buried in closets, organizing items in garages, and deep cleaning every inch of the bathroom. It’s a ritual to help rid spaces of clutter and welcome a fresh sense of Marie Kondo-like clarity into your home.
However, what can — and often — evades the tidying-up process are the files in the dreaded “document drawer.” Everyone has one. This drawer is home to years upon years of financial documents, obscure receipts, mortgage statements, medical information, legal records, education records, and obscure paperwork that should have been filed elsewhere but was left to live among the dust bunnies gathered at the bottom of the drawer.
It might be discouraging to think about the sheer volume of papers from 1980 that may be cramped into this small space, but the good news is there is an easy fix. In fact, now is the perfect time to make small adjustments to how you organize so you can build a foundation for lasting habits. Here are steps to help you figure out what documents to keep and for how long.
Every document has a different shelf-life. According to the U.S. Internal Revenue Service, “the length of time you should keep a document depends on the action, expense, or event which the document records.” This definition leaves much to the imagination, but here are some general guidelines to refer back to when sifting through old records so you won’t be left asking yourself “What documents should I shred and what should I keep?”
Dave Ramsey is a name known far and wide across the financial sector. His personal experiences with overcoming debt sparked his passion for teaching others how to take control over their finances and move forward in their money makeover journeys. Ramsey recently released an article for tax season that includes advice for organizing important life documents. In it, he includes a list of documents to save indefinitely. Here are some of the noteworthy few:
Major financial records
Year end statements for investments
Legal documents (marriage licenses, birth certificates, divorce papers, passports)
Real estate certificates
Pension plan records
Retirement plan records
It’s also important to remember that identifying documents are not the only ones worth saving. There are plenty of lesser thought-of documents that should also be stored permanently. These include documents that contain family memories and stories that would otherwise be lost if they were thrown away. There will never be a physical replacement for this kind of paperwork, and therefore, you and your family should keep scrapbooks, yearbooks, and other treasured objects to remain connected to the tales that define generations, individuals, and their adventures.
So what do you do with all the other documents you have? All other documents not mentioned above have a distinct timeline of their own. Each unit of time that is listed below is meant to be used as a guideline for determining how long to wait before discarding documentation that is no longer considered valuable. Bank of America suggests keeping the following documentation for these recommended lengths of time:
Utility bills, deposits, withdrawal records
Sales receipts from minor purchases
Monthly bank and credit card statements
Monthly mortgage statements
Supporting tax documentation (W-9, 1099 forms, charitable donations, tuition payments, bank and brokerage statements)
Unemployment income stubs
As mentioned, this is not a complete list, but it provides some insight into which types of documents and information should be kept in the short-term versus the long-term. In general, Consumer Reports states that it is recommended to keep financial documents — like ATM, bank-deposit, and credit card statements — for less than a year. Once these are reconciled against monthly statements, it is safe to throw them away. Insurance policies and investment statements fall into this same category and can be disposed of once a new policy is received. As for loan and tax documents, those should be kept for numerous years — and in the case of tax documents — up to seven years is ideal.
The final step in the decluttering process is to determine which documents will be hitting the trash bin. Ultimately, this decision is left up to you and what you think is important or not-so-important; there is no right or wrong method. The following list is meant to provide inspiration to help with navigating the ‘to keep or not to keep’ question:
Pay check stubs after reconciling with W-2
Expired coupons & warranties
When all is said and done, everyone will have their own unique reasons behind why they keep certain documents and throw others away. The key is figuring out how to be purposeful and consistent with the methods you decide to use. For example, if you decide that all paycheck stubs should be disposed of after being cross-referenced with a W-2, then this should always be the case. The rule stands regardless of whether or not circumstances might. It may take some time to find the right system, but with some practice and fine tuning it will be easy to create a process that fits you and your family’s unique needs.
Once you’ve created a process, you might want to consider upgrading to an electronic filing system to clear up any additional clutter. The Rosy app is a great way to digitally organize photos and important documents so you can get rid of hard copies.
If you’re interested in learning more, join our waitlist for the Rosy app launching later this year and discover firsthand how she will make the world a better place for families.