Spring Clean Your Financial Papers

Are financial papers cluttering up your kitchen table, your junk drawer or brain? Spring can be a great time to embrace “out with the old, in with the new” — including your stacks of old financial documents. While spring cleaning hacks often focus on getting stains out of sheets or cleaning your windows, this article is a bit different. 

Today, we’ll look at how to declutter your financial life. 

What financial papers should I keep?

Certain documents are important to keep on file, at least for a period of time. 

In general, tax documents, documents proving ownership of assets, birth certificates and other important documents should be kept on hand. Here’s a breakdown.

Documents to keep for 1 year

Certain documents are worth hanging onto, but only for a year or two. 

• Pay stubs

• Bank statements

• Credit card statements

• Receipts for large purchases

• Warranty documents for purchases

• Paid medical bills

• Receipts needed for tax filing

• Receipts needed for warranties or potential returns

Documents to keep for 7 years

Tax documents should generally be kept on file for at least 3 years, and ideally for 7 years. This is because IRS audits usually go back 3 years, but can go back up to 7 years in the case of serious audits. 

• Tax returns

• Supporting documents for tax returns (1099s, W2s, receipts, payment records)

• Proof of tax payments/withholding

• IRS correspondence

• Supporting receipts and documents

Documents to keep forever

You should always keep these documents, although they don’t necessarily need to be stored in your home.

• Birth certificates

• Social security cards

• Adoption papers

• Death certificates

• Marriage certificates

• Passports

• Living wills and wills

• Power of attorney documents

• Legal filings and records

• Military records

• Beneficiary forms

• Inheritance documents

It’s wise to store these documents in a very safe location. Bank safe deposit boxes are a great option, as the documents will literally be stored in a bank vault. 

What financial papers should I get rid of?

Any papers that aren’t on one of the lists above can generally be disposed of. This can include:

• Receipts: If you don’t need a receipt for a return, warranty or to file your taxes, then there’s likely no need to keep it.

• Documents you have digitally: If you have a digital copy of a document, there’s typically no need to keep the original. The exception to this is official documents like a birth certificate or any documents that have been notarized. 

• Bank and credit card statements: There’s typically no need to keep physical bank and credit card statements, particularly because most banks now have electronic statements available. The exception is if you may need these statements to file your tax return. 

• Old documents: Even important documents — bank statements, tax documents, etc. — can be shredded after a certain amount of time. 

How to keep financial records without clutter

For the documents you do need to keep, how can you store them without cluttering up your home?

Secure off-site storage

Storing documents somewhere safe, like a bank safe deposit box, can provide peace of mind. Plus, it declutters your living space.

Organized filing system

Picking up a small filing cabinet or file box is a simple, low-cost solution. Just be sure to organize and declutter your filing system regularly, disposing of old documents that are no longer needed.

Digital storage

Backing up files digitally allows you to shred the physical copies, but still maintain all your records. There are a few different ways to do this.

If you have a scanner, you can simply scan all the documents into PDF files, then save them on your computer. You could take pictures of them, or use a photo scanning app on your phone. 

Be sure to label the files clearly so you can search for them later. 

Back up digital files in at least two ways — your computer hard drive, an online cloud storage system like Google Drive or DropBox, an external hard drive, etc. 

How to safely dispose of financial papers

For the papers you do decide to get rid of, it’s important to be mindful of how you dispose of them. 

Many financial documents contain sensitive information that could potentially be used for identity theft. You don’t want these documents falling into the wrong hands!

A simple way to protect yourself from identity theft is to simply shred the documents. 

• Buy a shredder ($50-$150+)

• Visit an office supply store that offers in-store shredding services (Office Depot offers shredding in many stores)

• Search Google for community shredding events

• Check with your bank or credit union to see if they offer shredding services to members

You can also burn documents, soak them in water for 48 hours, or shred them manually with scissors. 

Reduce clutter and refresh your mindset

Getting rid of old financial documents can reduce clutter in your physical space — and also reduce clutter in your mind. 

Spring is a great time to refresh and reset for the coming year. With the right approach, you can emerge from the winter months feeling more at peace with your personal finances with some of the mentioned spring cleaning hacks. 

This is also a great time to reassess your short-term and long-term financial goals. Decluttering can give you newfound clarity, and help free up “brain space” for more important decisions. 

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