Are you one to set the mail on the counter when you get home from work? Most of it is junk anyway right?
You know you need to take care of the bills and important documents but you keep putting it off, and the pile keeps growing.
Eventually, you pay the bills. But then you stuff the paperwork in a desk drawer or another box you keep saying you’ll go through soon.
You’ve probably been saying that for months, but the box is filling up. There isn’t much room left in the drawers either.
The job ahead of you isn’t getting any easier, and honestly, you don’t even know what you should keep and how long you should retain it.
The time has come to take control of all of your paperwork and determine what’s important to keep and what you can get rid of.
There are lots of variables determining how complex this project will be. But it doesn’t matter if you are married, have kids, own a home or business (or both), or you are single and lease an apartment.
Figuring out what documents are important and how long to keep them will save you time and stress later when you need to locate paperwork quickly.
The goal is to have a simple plan and system that works for you.
Skip rushing out to the store to buy any fancy filing systems as you get started. Just get all of your paperwork out and get ready to sort it into three piles.
- Pile one is paperwork you know is important to keep; legal documents, personal records, financial documents, and property records.
- Pile two is what you will toss; junk mail or paperwork that made its way into the drawers or boxes you know you don’t need.
- Pile three is for any paperwork you have questions about.
Once you sort all your paperwork into one of these three piles, deal with each stack separately.
Set aside the “keep” pile because you know you’ll need to make a plan for these documents.
As for the “toss” pile, to help prevent identity theft, remove any personal information before you recycle or toss these documents. We highly suggest shredding anything with your personal information.
Since you aren’t sure whether the documents in pile three are important, it’s probably best to keep them. Realize that it will be more difficult to retrieve an item (or a copy of it) than it is just to file the original one away.
You can always get rid of extra paperwork when you go through your files in the future.
Focusing on What’s Important
At this point, you’ve tossed all non-important paperwork.
You may find more paperwork to get rid of as you continue to sort through the two remaining piles. But at least now you’re focusing your time and energy on documents you think are meaningful.
It’s helpful to organize your important documents into the following groupings:
- Legal Documents
- Personal or Family Records
- Financial Records
- Property Records
You probably never questioned the need to keep these documents because you knew they were important. But they may have found their way to the bottom of the box or back of your desk drawers.
Legal documents you should keep indefinitely include:
- birth certificates
- marriage licenses or certificates
- separation or divorce paperwork
- adoption documents
- social security cards
- copyrights or patents
- paperwork from military service
- citizenship or naturalization papers
- wills, living wills or trusts
- durable power of attorney and health care proxy documents
Once you’re organized, it won’t be difficult to keep these important papers together – even if you think you’ll never need them again.
Until you know for sure you won’t need certain legal paperwork, keep it in your files. You’ll thank yourself if you’re ever asked to produce a document.
Your family will thank you too if something unfortunate should happen to you.
Personal or Family Records
This could end up being your largest pile of necessary paperwork. For now, just gather all of the information in one place. You can create specific files later.
The important personal or family records you should keep indefinitely at this point include:
- licenses or certifications to practice (to verify your credentials)
- educational records and diplomas,
- employment records
- medical history information including –
- major illnesses
- baptism and confirmation records
- funeral plans
- keys to a safe-deposit box, house, car, or home safe (or the combination to a safe)
Some of your personal and family records will be updated over time. As you get new paperwork or documents, you may be able to shred old papers or policies. If you think you might want past paperwork as a reference, keep it until you are sure you won’t need it.
Records in this category include:
- subscriptions and organization memberships
- pay stubs from work
- insurance policy information including –
If you own pets, this is also a good place to keep their health, insurance information and licensing records too.
Just as some of your personal records should be kept indefinitely, some of your financial records should be with you for years to come.
This includes any paperwork relating to the financing of a home (mortgage documents) or improvements made on the home, student loans, car loans, or any other debts including revolving lines of credit or home equity loans.
Keep the origination paperwork, records of payments, and any documents that show a debt has been paid off.
You should also keep any initial investment, retirement account, pension, and financial institution paperwork (stocks, mutual funds, CD’s, REITS, bank or credit union accounts) until you close accounts and are absolutely sure you will not need any of these records.
Copies of your tax returns and all supporting information also should be kept for a number of years, generally three to seven.
Follow the guidelines in this IRS release and talk to a tax professional to determine how long you should hold on to your past tax documents.
Some of your important financial paperwork may be updated on a monthly or quarterly basis. This includes savings, checking, and credit card transactions and balances.
After reconciling your statements with deposits, withdrawals, and purchases – you can decide how long to keep the statements.
If you have access to them online, you may not need to keep any hard copies unless you want to. You may decide to keep hard copies of anything you will need for tax purposes.
Other relevant information you should consider keeping in your household financial records include:
- household budgets and spending plans
- financial goals and mission statements
- net worth statements
- a household inventory including dates of purchase and approximate values
- a safe-deposit box inventory
- financial institution and credit card company information
Keeping receipts from everyday purchases and paperwork such as utility bills can get overwhelming.
But don’t throw receipts and bills away before you reconcile them with automatic withdrawals from bank accounts or credit card statements.
You can also use your receipts and bills for budgeting, expense tracking, and some you may also need for tax purposes. Don’t be too quick to add them to the toss pile until you are sure you won’t need them.
There may be some overlap with this category as you may have put mortgage documents with your financial records and property insurance information with your other insurance records.
However, you choose to organize them is fine because they are no longer stuffed in a drawer or somewhere in a box.
Items in this pile should be kept for the length of time you own the property, and many you may need to keep for years after you sell the property (see the IRS statement regarding property records here.)
The documents include:
- abstracts for real estate
- auto titles and bills of sale
- information on burial lots
- property deeds
- real estate closing paperwork including –
- sale price
- legal fees
- property easements
- any guarantees and warranties purchased
- information or manuals on appliances
- maintenance records
What Documents Should You Keep and For How Long?
If you’ve separated your important documents into these four categories (or into some other system that works for you), you are off to a great start in getting your paperwork organized.
You may feel organized enough at this point and just put the paperwork in a box or file cabinet. But if you’re excited about getting more organized, go a step further.
Create individual files for many of the records within each category (separate files for a student loan and car loan paperwork.) You may also decide to move files around between categories.
Files you need to keep indefinitely and that you won’t use often may go to the back of the box or cabinet. Keeping records requiring more attention during the year in the front of your filing system might work better for you.
Don’t forget about online statements or important information you have stored in the “cloud” or on your computer or memory sticks. As long as you have paper files, add notes about what information you’re accessing and holding digitally as well.
Here’s more on the best ways to store important documents.
Vicki and Amy are authors of Estate Planning 101 – a Crash Course in Planning for the Unexpected -coming soon from Adams Media.