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Clearing Out Your Personal Finance Clutter: A Keep and Toss Checklist

One of the most tedious aspects of personal finance is keeping track of paperwork. By law, you're obligated to hold on to certain financial documents in case the IRS decides to audit your taxes, which can feel overwhelming. But once you know which documents are essential and which are just clutter, you'll find that your paperwork is more manageable. If you have trouble deciding what to do with each piece of paperwork, take a look at these two lists to know what you must keep and what you can toss.

What You Must Keep

  • Bank statements — keep for one year unless they're needed to support tax filings, in which case they must be kept for seven years.
  • Home purchase and improvement records —  keep for as long as you own the property.
  • Rental agreements — keep until you get your security deposit returned. 
  • Insurance policies — keep for as long as the policies are in force.
  • Living wills — never throw them out.
  • Pension plan documents — should never be tossed. 
  • Investment certificates and annual investment statements —  should be kept until you sell the investments.
  • Loan documents — must be kept until you sell the item the loan covered.
  • Real estate deeds — must be kept for as long as you own the property.
  • Social security statements — only need to be kept until you receive the next statement (usually yearly).
  • Tax records — including all back-up documentation like W2s, must be kept for at least three years. If you underreport your income by 25%, you can be audited for up to six years. 
  • Vehicle titles — keep until you sell or dispose of the vehicle.

What You Can Toss

  • Grocery receipts — once you’ve balanced your accounts, these are OK to toss.
  • Paycheck stubs — some people keep their paycheck stubs until they receive their W-2 at the end of the year so they can add up their stubs and verify that their W-2 is correct. 
  • Canceled checks — the exception to this rule is if the canceled checks verify business expenses. If they do, hang on to them for three years.
  • Utility bill stubs — these are needed to prove residence for things like getting a new ID card. You should also hold onto them for one year until you have finished your taxes in case you need to be able to have proof of payment.
  • Credit card receipts — reconcile your account each month and then toss your receipts.
  • Old tax returns — if you're hanging on to tax returns from a decade ago, go ahead and purge your files. Keep only the last six tax returns, and free up your file space by getting rid of the rest.

With your personal finance files updated, you'll feel much more clear-headed about your financial life. One thing to remember, though, is to shred your financial documents when you discard them. Bank statements, credit card statements, and tax returns all contain personal information that could be a gold mine to an identity thief. Shred anything that contains account numbers, your social security number, or other personal information. If you want to keep your financial records always up to date, consider saving this blog to help you go through the process anytime it’s necessary for you and your family.

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