Spring Cleaning Week: Start With Your Financial Records

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Spring officially starts March 20. Tax Day, April 15, is not far behind. How are your financial records? Unruly like a wild lion? Or tame and manageable, like a little lamb? If you are scared to even look, it is time to spring clean those musty folders, conquer that mountain of bills, statements and receipts cluttering your desk, and rediscover the computer files that "must be here somewhere..." Today!

To clean up properly, experts recommend the right tools. For your financial records, start with a good shredder. Then drop your old electricity and phone bills through those motorized teeth. “Anything with routine payment shows confirmation of receipt in the next statement, so why hold onto those?” says Morris Armstrong, a financial planner in Danbury, Connecticut who blogs about personal finance. If you aren’t sure what to shred and what to file, consider this rule: If it’s been a few months and you haven’t reconciled those receipts – toss them. “Most paperwork you don’t have to keep. You don’t need those boxes of receipts," says Armstrong. "What are you going to do with them, prove to yourself that you paid your groceries?" 


As for determining what to keep, keep current insurance policies, receipts for big appliances and electronics, warranty information, contracts, property deeds, closing papers, and lease papers. Also, keep hard copy originals of estate planning documents, wills, trusts, and contractual agreements, says David Greene, Vice President of CJM Wealth Advisers in Fairfax, Va. Keep tax records for seven years and, if you have somewhat complex returns, and are wary of an audit, keep tax records even longer. 


“You can shred ATM and grocery receipts, performance reports, IRA confirmations, annual and semiannual reports, and bank statements more than two years old," he says. Keep in mind that you don’t have to hang onto everything yourself—your financial advisor has to keep your records for at least five years.


For paper-based files, Armstrong is a fan of Unikeep binders because they are flat, fit hundreds of pages, and take up very little space. Greene, however, prefers virtual files, and recommends that people transition their  finances to banking and record keeping online. (Of course, back up all files on an external hard drive or disc.) “The smartest and greenest thing you can do in cleaning financial house is to take advantage of your financial institution’s option for email statements” says Greene.


Software can make the job easier. Greene likes, “Quicken (INTU), or software like it; it lets you keep track of checks and receipts.” This is a good system to use whether you are self employed or working for a company where you have expenses that can be written off. He’s also a big fan of scanning documents that don’t need to be a hard copy, then saving them as PDF (ADBE) files.


Either way, keeping your financial records in order is as important as cleaning out the garage, and may not take as long. “If you put in five hours over the weekend you can get your financial records in shape pretty easily,” says Armstrong. “Then just learn to control the clutter.”

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