Have you ever kept paperwork simply because you didn’t know when it was safe to throw away? Do you have a file cabinet tucked away somewhere stuffed with decades worth of receipts, bills, or tax returns? Don’t worry, we’ll help you climb out from underneath that paper mountain. Let’s take a look at what you should keep and what you should probably throw away.

Steps for a Self-Guided Conversation – Do I Keep or Destroy?

Do you need the physical paper or just the information on that paper? First, you’ll want to differentiate whether or not you need the original record or if you only need the information on it. Are you able to obtain and download your information from an online source, such as your bank account or your insurance company? If so, you probably don’t need the paper copy if a downloadable record is available online.

If the document is available online, will you be able to access it during times of crisis, like injury, illness, or natural disaster? If you need to request or replace your document, how difficult is it to obtain the record from another party or vendor?

Next, identify specific situations or events that will require you to use the original document. If you can think of a scenario where you’ll need the physical record, including potential litigation over a bad real estate deal or the title insurance policy when you purchased your current residence, then ask yourself if you’re willing to hold onto it until you need it.

If you’ve determined you don’t need to keep the physical copy of your records, consider it a candidate for disposal. Remember to keep your potential “keep” scenarios realistic ones. The day your home is whisked away to the land of Oz is the day pigs and chickens learn to fly.

What Do You Keep?

Utility bills – As a rule, you’ll want to keep utility bills for about a year. If you’re claiming any part of your utilities for your business on your taxes, it’s often better to use the simplified option from the IRS for the home office deduction rather than keeping these bills in the drawer.

Home records – Any paperwork involving renovations, repairs, or restorations of the home or homes you own should be kept for a year. This allows time for you to refer to the receipt or paperwork should you need to consult the contractor or business that did the renovation, restoration, or repair. If the work on your property is an improvement, such as adding on a room, which increases square footage, or updating a tired master bath to be more modern and functional, these improvements increase the value of your home. This improvement paperwork is vital to keep if you intend to sell the property.

Cancelled checks – Let go of those carbon copy checks and join the future by logging onto your bank and looking up an image of your paper check online. If you write a significant volume of checks, ask your bank to include micro-images of them on your statement.

Bank statements – One year is the magic number it seems, as bank statements should be kept in hard-copy form for at least that long. Only keep what you need for tax purposes for three years.

Car insurance – Keep your paperwork for your car insurance for as long as your policy is active or if you have an open claim. Many insurance brands offer paperless policy and billings options; they even sweeten the deal with a small discount. Print them very selectively and keep them for any claims made.

Credit Reports – Keep the most current of your report from each of the three providers; Experian, Equifax, and TransUnion. Keep additional copies for disputed accounts.

Receipts – If you need receipts for your taxes, three years is the time frame you should keep them. Otherwise, if you have receipts for big-ticket purchases, warranty claims, or insurance claims, the best thing to do is scan the receipts so you’ll have access to them online and not cluttering up a file somewhere. Popular examples include computers, electronics, and household appliances.

To Shred or To Recycle? That is the Question

Often a hotly debated subject among partners with different approaches to document retention debate. Some people believe you should shred everything. Others believe it’s okay to recycle everything. The truth is a little more nuanced than that. Here is what we recommend.

What to shred:

Shredding applies to any paperwork that might have sensitive information on it, such as your Social Security number, any account or card numbers, or any other information you wouldn’t want to become common knowledge, such as medical records, legal documents you no longer need, education or performance reports, or taxes from years’ past. The good news is you don’t have to shred these documents yourself. Major big-box office retailers and shipping stores like UPS or FedEx offer secure and affordable shredding. Drop off is quick, easy, and affordable.

What to recycle:

Old utility bills fit into this category, as well as shipping documents and loose-leaf paperwork that clutters up your desk. This includes receipts you don’t need to keep, one-time bills such as when Fluffy or Fido get sick, and any junk mail that might come your way. Don’t forget to include any and all instruction manuals, catalogs, tear pages from magazines, and even old crossword puzzles.

The One Year Rule

All in all, a good rule of thumb is to keep your important documents for at least one year unless you need them for taxes, and then keep them for up to three years. Whatever is sensitive, shred, and whatever is unnecessary, recycle.

If you find you’re still overwhelmed by it all and need a knowledgeable, compassionate coach to let go of your paperwork pile, our seasoned team of daily money managers at Organized Instincts can help you streamline financial files. Schedule a free consultation today and give yourself the freedom to joyfully and abundantly live life.