It’s a mantra that our moms seared into our minds as we grew, but it’s always worth repeating: It’s time to clean up. This time, though, we’re talking about cleaning up our finances. Although the spring is a great time to clean out files (after you’ve plowed through receipts and filed your income tax return) and reassess your financial picture, any season when you make time to clean out your financial house will bring positive results.
You know the scene: you’re flipping through a stack of mail that’s been on the kitchen counter for a handful of weeks, and DOH! You find an unpaid bill that’s now past due. How do you avoid this in the future?
Organize, organize, and organize some more:
Ongoing Bills. Financial guru Suze Orman says it best: “When you consciously open, read, and file away your bills and statements, you are connecting with your money and taking control of your life.”
Tax Returns and Supporting Documents. The general rule is to keep your returns for three to seven years, depending on your circumstances and type of return. The IRS website provides guidelines and instructions, particularly for those who own a business.
Investment Statements. Financial experts recommend keeping any documentation that supports your income tax statement for at least six years. Once you have your year-end investment statement, you can shred the monthly statements.
A Permanent File. This file (or better yet, a waterproof/fireproof box) should contain confirmations of all the loans you’ve paid off (auto, school, home, and so on). This is important in case you need to give proof to the credit bureaus about any misreported information.
Finally – now that you can see the actual surface of your desk at home – remember that there are certain documents that you should keep for a lifetime in your permanent file or box as well: wills and any other legal filings such as a divorce or adoption, retirement account withdrawal receipts, bankruptcy paperwork, and inheritance confirmations.