Save or Shred? Eliminating Anxiety Around Financial Records

Save or Shred? Eliminating Anxiety Around Financial Records

One specific aspect of pursuing financial freedom is eliminating anxiety around financial records. There’s always that niggling doubt at the backs of our minds that someday we’ll need to present every last receipt for purchases we’ve made over the past ten years. That anxiety can lead to a negative outlook on your financial situation, which could put you on a pretty tough path.

We don’t like to see anxiety around money. We’d prefer that you find some peace and perhaps even some fun. So, let’s examine what you really need to save or shred so you don’t end up surrounded by piles of paper.

What Do You Keep?

If you are playing it safe, you save your financial documents with the mindset of “if in doubt, DON’T throw it out.” But there are some things that don’t need to take up storage space. If it is from the previous century, or even the previous decade, chances are you no longer need it.

However, there are plenty of records that you need to make sure to hold onto for at least a few years. As a general rule, if the document is for something active and unchanging, you need to keep that for its duration. For example, you keep the deed to your home as long as you have your home, along with insurance records, stock records, property tax records, other deeds, etc.

Financial records such as tax refunds and other tax records should be kept for a certain period of time in the event you are ever audited. Bank records, medical bills, and other financial documents should also find a home in your office for at least a minimal amount of time. How long? Read on.

How Long Do You Keep It?

The “just in case” mindset is good to have for at least a short period of time. After that, it’s time to consider it clutter. If you keep all your records indefinitely, you may have trouble finding what you really do need when the time comes to use it. Once a year, make a point to go through it all to purge what is no longer needed. With the new year upon us, this is a great time to do this!

In general, financial records, such as tax documents should be kept for 7 years. This would include anything you use to file your annual tax return and the record of the return itself. Also, consider waiting at least 7 years before getting rid of your annual bank statement.

Items that you may not need for the sake of IRS, but should still be kept at least 1 year anyway in case any questions come up would include: canceled contracts of any sort, real estate sales, and paid medical bills.

Where Do You Keep It?

If piles on your desk are your thing, then you may as not bother saving anything (unless your memory is amazing.) A better bet is to file and label. There’s nothing wrong with the old-fashioned boxes labeled by year and stored in the attic method. If you have enough file folders, you can break down categories as narrowly as you’d like. The more categories, the easier it will be to find what you need when you’re looking for it. Also, consider the purchase of a fire-proof safe to further ensure the duration of your valuable documents.

Is there worry about going digital with your record-keeping? Absolutely not, as long as you aren’t using outdated programs, which could make your records obsolete after storing them too long. Using encrypted services, whether on your own software or through a bank, can help keep your documents safe. However, be sure to have readily accessible paper copies of emergency documents such as insurance policies and living wills.

People do get audited. So, as much as you would like to just toss it all, you can’t. However, life can be made so much easier by only keeping what you need. Find a safe and organized place for your records and clean it out once a year. You can be an organized person with less than thirty boxes of financial information. Imagine just one box.

Do your finances cause you anxiety? Do you wish you could have all of your financial questions answered seamlessly without having to dig through Google? We are here to help you! Contact us at The Hopman Group and let us help ease your mind.