August 31, 2022
It’s time to manage all those papers that are taking up space in your filing cabinets!
But how? Which documents should you preserve? Which ones should you shred? Here are 11 helpful tips on what to do with tax documents, legal documents, and property records.
Documents to keep.
At the top of this list? Estate planning documents. Your will, your living trust, and any final instructions should be carefully labeled, stored, and protected. Your life insurance policy should be safeguarded as well.
Records of your loans should be preserved. That includes for your mortgage, car and student loans. Technically, you can shred these once they’re paid off, but it’s wise to keep them around permanently. Someday you may have to prove you’ve actually paid off these debts.
Here’s a trick—keep tax returns for at least 7 years. Why? Because there’s a 6 year window for the IRS to challenge your return if they suspect you’ve underreported your income.¹ Keep your records around to prove that you’ve been performing your civic duty by properly reporting your income.
(Check your state’s government website to determine exactly how long you’re supposed to keep state tax returns.)
Keep all of your records pertaining to…
- Your ownership of your house
- The legal documents for buying your house
- Commissions to your real estate agent
- Major home improvements
Save these documents for a minimum of 6 years after you move out of your home. If you’re a renter, keep all of your records until you’ve moved out. Then, fire up your shredder and get to work!
Speaking of your shredder…
Annual documents to destroy.
Every year, you can shred paycheck stubs and bank records. Just be sure of two things…
First, make sure that you’re not shredding anything that might belong in your tax records.
Second, be sure that you’ve reviewed your finances with a professional who will know which documents may need preserving.
Once you’ve done that, it’s fine to feed your shredder at your discretion!
Credit card receipts, statements and bills.
Once you’ve checked your monthly statement against your bank records and receipts, you’re free to shred them. You may want to hold on to receipts for large purchases until the item breaks or you get rid of it.
When in doubt, do some research! It’s better than tossing out something important. And schedule an annual review with a licensed and qualified financial professional. They can help you discern which documents you need and which ones can be destroyed.
¹ “Save or Shred: How Long You Should Keep Financial Documents,” FINRA, Jan 27, 2017, https://www.finra.org/investors/insights/save-or-shred-how-long-you-should-keep-financial-documents