Should It Stay or Should It Go? What Financial Records You Need to Keep

With the sheer amount of paperwork needed to maintain a household, many of us struggle with what to keep and what to throw away. Bills, bank statements, insurance policies and credit card information often blend together into one unintelligible pile. How do we know what is safe to pitch?

Developing a solid financial records management system can help you and your loved ones navigate your personal and financial documents in case of a major life event.

What to Keep

There’s a temptation to err on the side of caution and just keep everything. Aside from the inevitable clutter that causes, the problem with that is it makes it near impossible to find anything when you need it. Taking the time to throw away or shred paperwork you no longer require should help with this problem.

Here’s a short list of common household documents, courtesy of USA.gov:

Document

How Long

Bank Statements 1 year, unless needed for taxes
Tax Records 7 years from filing date
Home purchase/Improvement records As long as you own the property
Auto/Home Insurance Until you renew the policy
Credit card statements Until paid, unless needed for taxes
Contracts Until updated
Will/Trusts Until updated
Receipts for large purchases Until you sell/discard the item
Service Contracts/Warranties Until you sell/discard the item

There are a few documents that you never want to discard under any circumstances. These include items such as:

  • Birth certificates
  • Social security cards
  • Marriage license
  • Education records
  • Military service records
  • Household inventory
  • Life insurance policies

Taking the time to keep your paperwork current will pay dividends down the road as it becomes much easier to remain organized.

Easy Access vs Long Term Storage

You don’t need to worry about having immediate access to all your paperwork all the time. Many experts recommend creating an “active file” where you can keep documents that you refer to on a regular basis. These would include items such as:

  • Bills/bill payment receipts
  • Bank statements
  • Employment records
  • Health records
  • Insurance policies
  • Password list

Most of these documents should easily fit into a small filing cabinet or spare drawer. Other documents, especially certified or original copies, can be kept in long-term storage.

Keeping Documents Safe

If you’re like most people, you probably keep most of your important paperwork in a collection of cardboard boxes stored in the basement. But what would you do in case of a fire or a flood? Considering the difficulty in replacing many of these documents, it makes sense to take steps to protect them.

One option is to keep your most important documents in a safety deposit box. You could also purchase a fireproof/waterproof safe to keep at home. Either way, it’s a good idea to seal your documents in an airtight, waterproof container (even something as simple as an airtight plastic bag) to provide a second layer of protection.

Yet another option is to go paperless and scan all of your paperwork into your computer. Making digital copies is a quick and relatively inexpensive way to simultaneously remove clutter and create a secure, well-organized record management system. Optical character recognition (OCR) technology allows you to search scanned documents by keyword, making it much easier to find specific information when you need it.

Regardless of which option you choose, you’ll want to find a method of organizing your records that works for you and would make sense to anyone trying to make sense of them in case of an emergency.

Do you have a trick for managing your household documents? Share in the comments below!

Photo courtesy mrmanc