Broker Check

Clearing Financial Clutter

| May 03, 2020
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The term “spring cleaning” has hit my household a bit differently this year, much to the chagrin of my two daughters. One of the questions I receive often is “What can I throw out?”  I thought this would be a good time to dive into the subject.  I hope you find this useful and not painful.

Excavation and Organization: Declutter, Shred, File

Before you do any filing, think about what you can just get rid of now.  Be sure to shred anything with personal information on it.  We all have to be much more conscious of protecting our identities from cybercrime.

Some of you may be able to scan paper documents or only get electronic documents that you can store in files on your computer or your devices or in the cloud.  Just be mindful of protecting your data from cybercrime and make sure you back up your records.

Let go of what you no Longer Need

You are probably holding on to more than you need.  You can let go of the following:

  • Marketing materials and envelope stuffers. Most bank and brokerage statements come with materials about other products and services. If you aren’t interested in them, get rid of them right away.  If these don’t have any personal information on them, recycle them.
  • Cancelled checks. Keep any cancelled checks you need to support tax deductions, insurance claims or the cost basis of your home (* major home improvements).  You probably don’t need to keep checks for routine purchase once you’ve reconciled your bank statements – shred them.
  • ATM receipts. Once you’ve reconciled your bank statements, you can shred these.
  • Annual reports. Read these when you get them and then recycle them.  Even better – many are available online now so check with your brokerage company to see if you can be notified electronically.
  • Either cast your vote right away or toss them out if you don’t plan to vote.
  • Paid bills. Once you’ve paid the bill you don’t need to keep the statement unless you need it to support your tax deductions. Some people like to keep one- or two-months’ worth of utility bills on file in order to prove residency or quickly find service contact information.
  • Pay stubs. Keep one year’s worth to reconcile with your employer’s W-2 form.  If it matches, you can shred the individual paystubs.
  • Credit card receipts. Match your receipts to your monthly statements when you get them.  If they match up, you can shred the receipts unless you need them to document your tax-related expenses, insurance claims or the costs basis of your home (major home improvements).  Save receipts for major purchases until the warranties expire.

 Once you’ve cleared out what you don’t need, you’re ready to file.

Keep financial papers in four main places:

  • Pending
  • Current
  • Archive
  • Safe Deposit Box or Fireproof Home Safe

Pending File

In the Pending file, keep bills or other financial issues that need immediate attention.  Once a week review what’s in that file.  Once you’ve taken action, put those papers in an inbox to be filed in Current Files.

Current Files

Current files should hold papers that you regularly go in and out of for records of one year or less:

  • Bank accounts by type or account number (i.e. checking, savings)
  • Investment accounts by account type then number
    • Keep statements for a year; then archive the December or full year statement
  • If you have access to all statements online, there’s no reason to keep the paper copies too.
  • If you’re comfortable receiving electronic statements monthly, then you don’t need to file anything.
  • Cars by make or model.
  • Credit card statements by bank and account number
    • Keep statements for a year.
    • Archive any statements after a year that you might need to justify home capital improvements for cost basis or that record what you paid for big ticket items.
  • Current tax return related papers
  • Financial Planning (can include current Net Worth Statement, Investment Policy Statement, Retirement Projection)
  • Home records by property
  • Insurance statements by type of insurance (i.e. life insurance, health homeowners)
    • Keep current declaration pages.
    • Store actual policies somewhere secure like a safe deposit box.
  • Job-related paperwork
  • Last tax return
  • Loans
    • Keep monthly statements for a year
    • Archive only what you need to prove what you paid per year or when you fully paid off a debt.
  • Medical records by doctor
  • Phones or cable by provider
  • Property tax
  • Utilities by name

Archive Files

Archive files will hold similar files to current with the exception that these are papers that are over a year old.

  • Car records
  • Estate planning documents not kept in safety deposit box
  • Home improvement records
  • Loan documentation
  • Receipts for big ticket items
  • Tax returns for the past seven years (longer if your state requires it)
  • Warranties

Safe Deposit Box/Fireproof Home Safe

This is where you keep critical documents, just be mindful if you use a Home safe that a thief can’t just pick it up and walk off with it.

  • Birth or death certificates; adoption, divorce, or citizenship papers; marriage licenses;
  • Titles, deeds
  • Insurance policies
  • A digital record of your home inventory and any cherished photos
  • Estate planning related papers. Original documents, like your will, should be stored at your attorney’s office or a secure place your executors and powers of attorney can access.

Organization is Key

Once your filing system is set up the next step is to keep control in the future.  Here are some things you can do to work smarter:

  • Go paperless.
  • Create a new daily, weekly, monthly habit of organizing your financial paperwork.
  • Coordinate with your organizer/calendar. Make notes in your calendar of due dates.

Excavation and organization aren’t glamorous but it can be liberating.  Once you’ve put in the work on cleaning things up, you’ll be able to focus on the things that really matter to you.  Now put on your favorite music, go wash your hands, and get started!

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