Situation Analysis
This article provides tips on when certain documents are not necessary to keep anymore.

Financial Record Storage

Financial Record Storage


We are getting ready to sell our home where we have lived for over seven years and have a closet with several boxes of old financial records including receipts, statements, tax information and other papers. We need to decide what to keep and what we can toss out.

Neat and uncluttered closets can be a big plus when selling a house. It sounds like you are like many people that have accumulated financial records often just because it is easier to keep them than deciding what to toss.

The general rule is that you should keep information as long as you may need it. Here are some guidelines:

Tax Information
There is a general three year statute of limitation for your taxes. This means the IRS has three years from when you file your return to start an audit. (There is no limit for fraudulent returns). Therefore, you need to keep documents that support items on your tax returns for those three years. Each year you can throw out the three year old documents, but you should keep copies of tax returns forever.

Important Documents
There are some papers that deserve special attention. Documents to keep forever include: wills, powers of attorney, birth certificates, marriage documents, divorce or child care orders, trust documents, business agreements, military records and other such permanent records.

There are other documents that should be kept as long as they may be needed:

  • Insurance policies - as long as they are in effect or until a claim could no longer be filed.
  • Loan documents - until they are paid off.
  • Deeds and real estate papers - as long as you own the property plus any period for tax purposes.
  • Employee benefits information - as long as you are employed or until the benefit no longer exists.
  • Investment records - as long as you own the investment plus the three year tax reporting period.
  • Receipts and warranty information on major purchases - as long as you own the item and could make a claim.

Monthly Statements
Each month you will receive bills, statements and other financial information that you will need to handle. There is a great temptation to keep everything, but that is really not needed.

  • Recurring monthly bills - Once you have paid your insurance, rent, mortgage and utility bills, there is no need to keep them. You will have a canceled check to document payment and unless there is something special about the bill, you can dispose of them.
  • Credit card statements - Even though there is no requirement to keep these statements, you may want to save them for some period (a year) in case there is a dispute, you want to return an item or if you want to be able to analyze your spending.
  • Bank statements and canceled checks - Some people keep every canceled check and others toss most of them. Certainly you should keep canceled checks that support any tax deductions and any that you think may come in handy. Otherwise, canceled checks can take up a lot of space. Bank statements are a bit different. You may want to keep them for some period (three years or so) so you can document your payments for important items. Together with your checkbook register, you would be able to identify when and how much you paid for almost anything.

Set aside a few hours to go through your papers and have a big garbage bag for what you will toss out. If the papers you are tossing include personal information, you may want to shred those papers.

You will probably end up with a much neater closet and have a more attractive home for a potential buyer.

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