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5 Steps to Declutter Your Finances and Tax Records

Confused about what tax records and financial paperwork you need to keep and for how long? Money Girl Laura Adams helps you declutter your financial life, manage your tax records, and stay organized in 5 easy steps. 

By
Laura Adams, MBA,
Episode #579
5 Steps to Declutter Your Finances and Tax Records

Judy H. from San Diego emailed me with a common conundrum. She says, “I have tax records going back eons. When I search online, I see a variety of answers for when to pitch them—but I to trust your advice. How long do I need to keep financial paperwork?”

Thanks for your question, Judy. I’m envisioning your home office looking like an episode on Hoarders!

Just kidding—I’ve struggled with this issue too. I used to file everything and keep it way too long. So, I completely understand what it’s like to be drowning in paper and feeling uncertain about which financial documents to throw away.

In this episode, I’ll explain just how long you should keep important financial records and what you should toss. You'll learn five steps to declutter your financial life, manage your tax records, and stay organized.

5 Steps to Declutter Your Finances and Tax Records

  1. Identify which financial records should be kept forever.
  2. Go as paperless as possible.
  3. Use online bill pay.
  4. Digitize your taxes.
  5. Manage your digital files wisely.

Here are the details about each step.

Step #1: Identify which financial records should be kept forever.

First off, the bad news is that there are some important documents that you do need to keep as paper files. The reason is, they’re impossible or very difficult to replace.

Always keep these original records, even if you have a digital copy:

  • Birth and death certificates
  • Adoption papers
  • Citizenship papers
  • Military records
  • Education records
  • Marriage and divorce papers   
  • Immunization records
  • Passports
  • Social security cards
  • Wills and trusts
  • Medical directives
  • Powers of attorney
  • Documents with raised seals and notarized signatures
  • Any important financial document that you can’t get online

Some original records for expensive assets, such as real estate, vehicles, and investments, should be kept for seven years after the date you sell them. These include:

  • Real estate closing documents
  • Receipts for capital home improvements (these are big expenses that affect the value of your home, such as replacing a roof, installing a new A/C unit, or doing a remodel)
  • Titles or deeds
  • Promissory notes
  • Refinancing documents
  • Records on nondeductible IRA contributions
  • Documents related to gifted or inherited property

Consider keeping vital original documents in a secure place, such as a bank safe deposit box. You can get a small storage box for less than $100 a year at a local bank or credit union. If you have an attorney or tax accountant, they can also keep records for you.

Another option is a home safe or a filing cabinet that locks if it’s fire and flood resistant. For added protection, put your important documents in an airtight plastic bag before storing them.

Also, make digital copies of these documents and keep them stored in the cloud, just in case the originals get destroyed. I’ll cover more about digital filing in a moment.

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