I just love the whole idea of a New Year and new beginnings. Yes, I also love to look back and reflect on all the blessings and happenings that occurred in 2016. But I do love the fresh perspective and clean slate that a new year provides.
For years I dedicated the first week of January as a time to de-clutter, organize, and stock up on essentials because tax season was just around the corner and nothing at home would be accomplished for the next several months. I fondly called this week of preparation “Getting my house ready for neglect”!
Even though I have retired from “tax season” and for the most part my home no longer is neglected during this part of the year, I do like the feeling of a freshly organized environment. Especially when the financial paper tiger has been tamed.
Most people would love to reduce the amount of paper sitting on their desks or stuffed in file drawers. No action is taken because of the uncertainty of what you should keep and what you can discard.
Here is a quick guide to help you determine what to keep and for how long:
Keep permanently: Social Security card, birth certificate, marriage certificate, military discharge papers, estate planning documents, title documents, and life insurance policies. These are your most important documents. Be sure to keep them somewhere that is safe yet accessible like an in-home fireproof safe.
Seven years: This is the standard for how long you should keep your tax returns and supporting documents. Although the IRS has just three years to audit your return for any errors you may have made in good faith, they have up to six years to challenge your tax return if they suspect you failed to report more than 25% of your income.
More than a year: Documents like loan paperwork, car titles, and investments are necessary to hold onto until the debt is paid off or the asset is sold. Keep warranties or guarantees for as long as they are valid. Anything related to your home such as the purchase documents, and repair/improvement bills should be kept for a long as you own the home.
Less than a year: Most receipts including ATM, bank deposit, credit card receipts and medical bills should only be kept for a month or until you can reconcile them with your monthly statements. Hang on to your monthly bank, investment, and retirement plan statements until the annual statement arrives. Once you have checked that everything is correct, you can shred the monthly statement and bills.
Daily: Sort your mail every day. If it is junk mail, toss in the recycling bin. If it is a bill…pay it or schedule to pay it at a later date. If it is an invitation, enter the information on your calendar then display or discard. If it is a call to action, respond or schedule your response.
By clearing out the financial clutter in your life, you can decrease the financial stress, save time during tax season and best of all give you peace of mind.
