How well organized are you when it comes to your financial life? According to a poll done by Consumer Reports National Research Center, 89 percent of Americans asserted that they were fairly well organized or better when it comes to their important financial documents”. However, nearly one-quarter had either lost of forgotten about critical paperwork, and 16 percent had lost money or incurred a charge because of poorly organized paperwork.
Sure, organizing your paperwork isn’t sexy or exciting, but being organized can save you money, time, and keep your identity safe.
This spring, make sure you take time to clear out paperwork you don’t need in your home. And it could save your identity as well. Paperwork can be separated into five major categories: act immediately, retain for one year, retain for seven years, and retain long-term, and do not toss.
Pay and shred immediately:
• Phone bills
• Utility bills
• Credit card statements (unless you need them for taxes or as proof of purchase)
Keep for one year:
• Bank statements; receipts and deposit slips can be shredded once the monthly statement comes.
• Pay stubs
• Medical records. Keep longer if there’s a question over reimbursement or insurance.
Keep for about seven years:
• Tax records, tax returns, and supporting documents. This is because you can be randomly audited up to three years after filing your taxes. If you failed to report more than 25 percent of your gross income, the government has six years to collect the tax or begin filing in court.
• Documents about the purchase or sale of a home, or payment for home improvements
• Insurance records should be kept for the duration of the policy, plus five more years.
• Hold on to IRA contribution documents until you withdraw the money. Shred quarterly statements.
• Warranty documents should be retained as long as the warranty is in effect.
Do not toss:
• Essential records: birth and death certificates, marriage licenses, divorce decrees, social security cards, and military discharge apers.
• Defined-benefit plan information as well as health plan guides.
• Safe-deposit box inventory. This inventory should include the location of the box, your keys, and an inventory of all items in the box. Update the list when necessary.
• Estate planning documents. These documents include your wills, trusts, and powers of attorney (financial and medical). Also include contact names and information for your legal representatives.
• Life insurance policies as long as they are in effect.
Clean your way to a safe ID
• Shred it: It can be tempting to just throw away or recycle your paperwork. The Consumer Reports poll discovered that more than 50 percent of the people surveyed said they put documents through a shredder. Another 26 percent tear them up, 15 percent claim to burn them, and five percent admit to just trashing documents.
But anything that can identify you (your name, address and telephone number, social security number, account numbers, and birthday) can also make you vulnerable to identity theft. Tear off address labels from magazines and periodicals and shred items that have your personal information on them. Have extra checks from a move or cancelled account? Shred them.
• Secure important information: The financial information you keep should be stored in a secure place — such as a locking file cabinet or safe — to keep them safe from curious eyes. Keep keys in a safe place.
• Pay online: Another safety tip to prevent identity theft: switch to e-billing and electronic bank statements. Some businesses provide a discount or incentive for switching to e-bills.