How Long You Should Keep Financial Documents

Most things have gone digital these days. You’d be hard-pressed to find something you can’t do or send online. However, many financial institutions still stick with ink and paper to do business. There’s nothing wrong with the old fashioned way, but it can lead to some serious paper clutter in your home.

Not all financial documents are created equal, though. Some you should keep around for years, others can be shredded right away. Here’s how long you should hold onto different types of financial documents.

Save for a Year or Less

Many documents shouldn’t have a very long shelf life in your home. Monthly bank statements, for instance, can be shredded as soon as your account is settled for that month. The same goes for credit card statements unless you’re charging business-related things with tax implications.

Bills can usually be discarded within a year as well. After paying the bill for things like electricity and gas you can shred it without issue. For larger purchases, however, like jewelry or furniture, you should keep the receipt in case of damage or loss.

You should keep pay stubs for one year as well. Once you get your W-2 from your employer, as long as the info matches your pay stubs you can shred the last year’s worth.

Save For 1+ Years

There are plenty of documents and paperwork that you’ll likely need to keep indefinitely, but for at least a year. For instance, if you lease a car, you should keep a copy of that lease contract until it expires and you return the car. The same goes for buying cars – keep the bill of sale until you sell it.

In addition, if you own stocks or bonds, you should keep the confirmation record until you choose to sell.

Save For 7 Years

Seven years is the magic number that most financial analysts give for keeping tax-related documents. Whenever you file taxes, the IRS has a six-year window to dispute your filed income if they think you misrepresented it by 25 percent or more. There’s also a three-year deadline for honest mistakes and errors. Regardless, you should hold onto all tax documents for seven years.

Never Throw Away

Any non-recurring documents that aren’t linked to sales or transactions should generally be saved forever. That means your birth certificate and social security card, obviously, as well as things like marriage licenses, wills, and life insurance policies.

In some cases, these are things you’ll likely need for your whole life. In others, these documents are critical for your family to have after you’re gone. Either way, there are some things that should never leave your files.

See Also: Should You Do Your Own Taxes?