POINT OF INTEREST
Xerxes Nabong, CFP®, CDFA®
Philip M. Maliniak, CRPC®
Nicole Brown-Griffin, CFP®, CDFA®, EA
Aaron Petty, Client Associate
Hampton Roads: (757) 394-3486
Greater Phoenix: (480) 687-9339
Orange County: (949) 660-8869
Part Ways with Paper
“I recommend you dispose of anything that does not fall into one of three categories: currently in use, needed for a limited period of time, or must be kept indefinitely.”
These are words spoken by Marie Kondo, aka Konmari, a world-famous Japanese organizing consultant, author, and TV presenter.
She’s written books on organizing, collectively selling millions of copies around the world. Additionally, she’s been profiled on Netflix with her series, “Tidying Up With Marie Kondo” and “Sparking Joy with Marie Kondo.” People like her inspire us to de-clutter our lives.
Many of us don’t consider holding on to financial documents as being untidy. After all, we think it’s important stuff we’ll need at some point. The truth is most of it’s really not worth keeping. If anything, it may cost us time (rummaging through stuff) and money (when late bills and fees incur because of forgotten envelopes in that pile).
Unopened mail, drawers full of old paperwork, and stacks of bank statements and utility bills may be staring you in the face. You know there are important items in these piles along with things you know you need to get rid of right away. Suddenly, it dawns on you. Organizing your financial papers may be just as life changing as cleaning out a messy basement.
Here are some simple steps to get started.
- Say Goodbye
It’s time to say goodbye and discard. You no longer need ATM receipts after checking your bank statement. When a bill payment clears or you decide to hang onto a purchase, it’s time to part ways with statements or sales receipts, too. Unless it’s needed at tax time (keep for at least three years if used for a deduction), as proof of value for insurance in the event of loss or damage, or for a warranty, it’s probably time to get rid of it once it’s been used.
- Learn What to Keep
Here’s what you need to hang onto and for how long:
| Items to Keep | When to Toss |
| Medical bills | Once the claim has been paid, you don't need these any longer, unless you're deducting the medical expense on your annual tax return. Then follow IRS guidelines for keeping these documents. |
| Utility bills | Typically, you could dispose of these after your bill has been paid. If you anticipate selling your home, hang onto the last years' worth of statements to help potential homeowners. |
| Credit card bills | Keep credit card statements for 60 days. Most credit card companies give you 60 days to report errors. If you have a credit card that offers an extended warranty on items purchased, consider keeping specific statements relating to these purchases through the warranty period. If your credit card statements include any business purchases or charitable donations, you should keep them longer. You will likely need to document those purchases/donations on your taxes. It's important to hold on to evidence for tax-related purchases for at least seven years in the event your tax returns are audited. |
| Documentation of major loans and insurance policies | Keep these along with all your important identification papers (birth certificates, marriage license, Social Security cards, passports, etc.) in a secure spot, such as a safe deposit box at your local bank or a firebox at home. Keep payoff statements forever. |
| Annual tax returns and supporting documents (W2, 1099s, Kls) | Keep the most recent three years. You can be audited for up to seven by the IRS (see irs.gov for additional information.) |
| Paystubs | Keep these until you've received your annual W-2 form. |
| Property records that show improvements to your home | These can be used when selling a home to offset capital gains when the property is eventually sold. Keep until the house is put up for sale. |
| Bank statements | Keep these for one year. |
| Investment documents | Keep trade confirmations and monthly statements for one year and all capital gains tax reports for three years. |
- Make a Shredder Your Best Friend
Invest in a quality paper shredder or if you work at an office, be sure it’s okay to use one there. Shredding is key when getting rid of old documents. If it’s going away, it needs to be shredded to prevent anyone from acquiring any personal information about you. Recycle what’s left.
For the important stuff that remains, develop an easy-to-follow filing system that you’ll use. Invest in colored folders with tabs and a label maker if you don’t already own them. Categorize, label, and keep them in a drawer or filing cabinet. This is especially helpful in case you become incapacitated or pass away suddenly. Your loved ones won’t have to go searching too far to begin handling your financial affairs.
- Switch to Digital
Going digital with your statements and paychecks can help solve a lot of problems. Almost every bank, credit card company, investment company, and employer now offer a paperfree option. Take them up on this and switch to paperless delivery. We also recommend setting as many of your bills as possible on autopay to avoid overlooking a bill and making a late payment.
Although opting into e-delivery helps prevent additional physical clutter, you may still have a big mess on your hands in time. This one will just be on your computer, hard drive, or in a cloud. Treat your digital organization just like you would decluttering your paper. Keep it clean, organized, and easy for you to retrieve what you decide to keep. Regularly go through your emails and purge the ones that are no longer relevant.
- Get Started Now
Sure, making the first move to declutter your papers may be intimidating. But once you have things under control, establish a normal upkeep routine. The longer you wait to tackle that mess, the bigger that mountain of paper will grow.
Having your own organizing consultant can help in the undertaking. Luckily, you have one already with your team at Wealth Avenue. We welcome a conversation about other methods of dealing with your financial clutter. Together, we can develop a strategy of what you should hang on to and what you can find joy in parting with forever.
As always, we are just a phone call away.
Your Team at Wealth Avenue,
