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By Susan Hoffman
Contributor, Online Learning Tips
Personal financial records commonly involve keeping a lot of paper documents. Even though many financial transactions are now online, there are still ATM receipts, retail store bills, pay stubs, tax papers, and bank statements. Most people usually store these documents in cardboard boxes or in filing cabinets.
However, there is no need to retain all your financial papers indefinitely. Some can be discarded within a year or less, while other records should be kept longer in case you need them later. Below are some general guidelines to follow for discarding or keeping financial papers.
- ATM receipts after you check them against your bank statement
- Pay stubs after you verify them against your annual W-2 form and submit your tax returns
- Credit card receipts, unless they document purchases that you plan to claim as tax deductions
- Most bills — keep any sales receipts relating to expensive items such as computers or jewelry in case you need proof of purchase for an insurance claim or for warranty work.
10 Years or Less
- Federal tax records — the Financial Institution Regulatory Authority (FINRA) and the Internal Revenue Service (IRS) recommend that you keep federal tax records for at least seven years (however, you may want to keep your 1040s permanently)
- State tax records — check with your state tax office because how long you must keep your tax records varies by state
- Documents related to buying, selling, or remodeling your home — keep for at least six years after you sell your home
- Rental agreements (after you move out)
- Mortgages and auto loans (at least until the loan is paid off)
- Brokerage statements in order to determine capital gains later
- Wills and trusts
Student loan paperwork should be kept indefinitely or for at least seven years after filing. According to Olga Byxbee, the Director of Training and Process Review at APUS, “The IRS recommends that any student loan tax documentation (1098-E or other tax forms) should be kept for at least seven years from filing. Otherwise, as long as borrowers are paying off a loan, they should retain all their documents and contracts (Promissory Notes).”
“When the loan is paid off, the borrower should receive a payoff letter or statement that should be kept indefinitely. In case that there was an issue, any paperwork that documents the resolution of the issue should also be kept indefinitely,” Byxbee also advises.
Shred Financial Papers after You Discard Them to Protect Your Identity
Since many financial documents contain sensitive private information such as names, addresses and account and Social Security numbers that could be used for identity theft, consider buying a cross-cut shredder for papers you want to discard. Shredders are easy to buy at an office supply or department store; there are also good deals available through online retailers such as Amazon and Overstock.
Another option is to take your papers to a community shredding event. Such events are free and easy to find in your local newspaper or through online sites.
Make Sorting Through Your Financial Papers a Regular Event
Although sorting through all of your financial papers is time-consuming, this chore is worth your time. Making it a part of your regular spring cleaning will definitely help you save space in your home.