How Long You Should Keep Important Documents, And Where To Best Store Them
With tax season now over, you may be wondering how long to hold onto those documents—plus, where to hold onto those documents. Should you shred and toss them, or file them away for a certain number of years? Or is scanning them good enough?
Only 40 percent of Americans think they could readily find an important document, according to the Consumer Reports National Research Center. In addition, almost one in four Americans say they’ve forgotten about or lost a critical financial document. (Guilty! You?)
Although different people have different methodologies when it comes to saving or tossing important documents, below are some of the best tips I’ve heard. After all, if you put aside an important bill and forget about it, it could cost you—late fees, time, etc. Why risk it?
How Long To Keep Important Documents
1. IRS & Tax Documents
According to the IRS, you should keep tax documents anywhere from two years (i.e., from the date you paid the tax) to indefinitely, if you didn’t file a return. If someone asked to see your old tax returns and documents right now, would you know where to look?
2. Bank Statements
Some people think it’s not necessary to keep hard copies of these anymore, since most of us can bank electronically these days. However, others think up to a year is enough time, as long as you don’t need them for anything (i.e., proof of income).
Still others think just scan, then shred, the bank statements, or ask your bank to stop snail-mailing them altogether. But, be sure to check them out online at least once a month, to make sure you’re the only one who’s been making withdrawals linking to your account(s).
3. Pay StubsPhoto by projectidea
Many of us probably don’t even want to think of pay stubs right now, since we just used them (and/or W-2s) to file our taxes. But how long do we need to hold onto pay stubs? After all, sometimes we need to show them to people, like future landlords.
Geeks On Finance says to keep them for a year, until you get your next batch of W-2s. If your pay stubs and W-2s match up, it’s safe to say goodbye to the first one.
Otherwise, you should get in touch with HR. But, there’s a catch. The IRS. They can take three years to audit you and six years if you under-report income.
Your tax returns and W-2s should be proof enough, but you may want to scan your pay stubs before tossing them out. Best solution? Save the last pay stub of the year and the last pay stub from each job, Geeks On Finance recommends. As usual, great advice!
Where To Store Important Documents
1. Files & File Boxes
Penny Pinchin’ Mom uses file boxes to organize her documents, with hanging file folders inside, which she labels. A boyfriend of mine and I used file boxes and labeled our folders, too, though we also used different-colored folders for various documents—like bills versus student loans, and so on.
Meanwhile, ConsumerReports suggests organizing files according to dates, like “Keep for less than a year” (i.e., credit card receipts) and “Keep for a year or more” (i.e., loan documents), and so on. Point being, file boxes help a lot, so go buy some today. When you’re more organized, you won’t be sorry.
2. Safe-Deposit Box
ConsumerReports recommends a safe-deposit box for one-of-a-kind items, like birth certificates, marriage licenses, and vehicle titles. I wouldn’t have thought the last one, but it’s a great idea! They also suggest storing a list of everything in your home, just in case. Of course, I think scanning all of these is essential, too.
3. Go Paperless
Being paperless is “in” these days, and will probably only continue to grow in popularity as more and more cities and companies go green. And why not? Many of us probably have too many papers and pictures laying around. So, when you can scan and toss out the originals, it becomes a great space-saver.
A friend introduced me to this concept. While I am still getting used to it, she has mastered it and has a main folder on her desktop with dozens of folders within it, from “Childhood Pics” to “College Pics” and so on. The same goes for her documents.
Right when a bill comes in the mail, she scans it, then pays it. Or, if there’s time to pay it, she scans it, saves the part she needs to mail in (if she doesn’t pay it online), then shreds it. Suffice it to say, she has many folders in her computer, including “Current Bills” and “Paid Bills.” Last year, she gave me a scanner for my birthday, so I guess I’d better take the hint.
Worried someone will click on your folder and see all your private documents? Have no fear! You can “lock” the folder and password protect it, or download software to, like PackPal Folder Locker. In addition, you can label the folder something obtuse, like “Birthday Cake.” Sneaky, huh?
Photo by kenteegardin
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