What Financial Documents Should You Keep (and for How Long)?

While it can feel liberating to shed piles of paper documents, financial statements, and receipts all at once, there’s nothing worse than disposing of something you later need. Since many financial records are stored electronically, that’s less likely to happen. Still, it’s prudent to keep some hard copy documents on file. But which ones? And for how long? Our guide will help you decide what financial documents to keep, what to shred, and what to toss so that you have everything you need without becoming overwhelmed by paper clutter. 

Financial Documents to Keep For a Year  

It’s best practice to save pay stubs or evidence of payment for one calendar year, and this is especially important if you’re hoping to take out a loan. You should also keep investment statements, bank and credit card statements, and receipts for large purchases. Also, consider keeping paid medical bills for a year, especially if you have recently switched insurance providers or if you have any coverage questions. 

Financial Documents to Keep For Seven Years or More 

You’ll want to keep tax documents for a longer period, including Form W2s, Form 1099s, charitable gift donation receipts, and printed tax returns. Although you may file your tax returns electronically, it’s wise to save a PDF of your return and print it for your physical files each year you submit your returns. In case of an audit, you’ll have easy access. If you prefer electronic records over physical copies, you can scan or photograph additional tax documents to add them to your digital files. It’s a good idea to have a digital copy of your tax documents in two locations. In addition to saving it on your local hard drive, consider saving a copy to a cloud service and on an external hard drive. This will ensure that even if one of the files is corrupted or lost, you have two additional backups to rely on. 

Financial Documents to Keep For Life 

There are certain documents you want to keep for life, and those include wills, power of attorney documents, social security cards, retirement account information, legal filings, and any birth, death, adoption, marriage, or divorce papers. This information is essential for everything from taking out loans and securing a passport or other identification, to licensing a car, establishing social security benefits, or disbursing an estate. These documents are also difficult to have reissued, so keeping the originals on hand is essential. At this point in time, these documents are still on paper in many states, although the change to electronic records may come in time. 

For these essential documents, consider several secure storage options. You may want to purchase a metal filing cabinet or document safe. Consider what environmental events your location is most vulnerable to. If flooding is a possibility, look into waterproof storage. If a fire is more likely, choose a flame-resistant storage solution. You can also keep copies of these documents electronically or in a second location for extra security. 

Guidance on Creating Electronic Copies of Documents

You can electronically scan or photograph essential documents to save copies of them. However, unorganized digital data can be just as confusing to sort through. When you’re photographing or scanning these documents, create a system of files or organize the information intuitively. Alternatively, use a storage tool with a searchable text function such as Evernote. This way, all the text in the photograph—even your handwritten notes on the document—are searchable.  If you’re not sure if your photos are backed up to the cloud, double-check that your phone’s photo roll is saved to the cloud as well. However, keep in mind that many apps can access your camera roll. Since this is the case, photos of financial documents need to be protected. While it’s unlikely your photos could be mined for personal data, it is possible. To ensure your safety, take photos, upload them to a password-protected file or cloud service, and then delete the images from your photostream. 

Southwestern Investment Group Can Help You Clarify Your Financial Picture

Taking some time to declutter can help you be more aware of what documents you have. It also gives you the chance to sort documents, organizing them according to how long you need to keep them. Being aware of your financial documents can make applying for a loan or preparing for an audit easier. If you’d like help getting a sense of your complete financial picture, meet with an advisor to answer questions and start planning for the future.

Legal Disclaimer

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