Spring Cleaning

As an adult, you’ve probably received thousands upon thousands of documents. Between bank statements, 401k statements, mortgage documents, medical bills, explanation of benefits, it’s enough to overwhelm anyone.

Dealing with them can be a hassle. But what do you do with all these envelopes and emails?

Here’s what you should not do:

• let these documents pile up indefinitely
• keep everything
• throw everything away.

You need to find a ‘Goldilocks’ approach that allows you to retain important documents and discard the rest.

I’ve outlined the best practices below so that you can make sense of the madness.

What to Keep and For How Long

Let’s start with the easy stuff. Here are the few items that you should keep until you crawl into the grave.

• Vital Records: birth certificates, marriage licenses, and divorce decrees
• Legal Documents: adoption papers, death certificates, and estate planning documents (e.g. wills and trusts)
• High-Value Financial Records: pension plans, retirement plans, and deeds to property
• Insurance Policies: Insurance, Disability Insurance, Homeowners Insurance, Umbrella Insurance, and auto insurance policies. For Life Insurance, keep the original (usually very long) policy. For the others, retain the current policy (typically re-issued annually).

Now, what about everything else? Here are documents that have an expiration date on them. You should keep them, sometimes for years, but eventually you can throw them out.

• Tax Returns: Keep these for a minimum of seven years. If you have the storage space, holding onto them indefinitely is even better.
• Year-End Statements: When you receive statements from IRAs, 401(k)s, investment accounts, and bank statements, download and save these. Save them digitally because they will take up entirely too much space if you print them all out. But definitely retain these. Don’t rely on these firms to keep them forever; most will only save records for a few years.
• Trade Confirmations: If you’re saving your year-end statements, don’t bother saving any of these. You can toss them.
• Roth IRA Contributions (or Tax Form 5498): Keep these until you retire. They are essential to prove your contributions–especially since you can withdraw from your Roth IRA tax-free after five years, assuming the account has been open that long.
• Medical Bills: Retain these for at least one year after payment. If you’ve had substantial medical expenses, these will be helpful for calculating tax deductions. Keep any ongoing claims or disputes until one year after they are resolved.
• Receipts: we encounter so many receipts and most are not needed long-term. Here’s what you should save: receipts related to medical expenses eligible for tax deductions, items still under warranty, costs that will be reimbursed by an insurance claim, or, if you own a business, deductible business expenses.

Storing Your Documents

You can keep physical copies in your home, but for sensitive documents (like social security cards and passports), use a fire-proof safe.

For the digital documents, many people utilize cloud-based options like Dropbox, Google Drive, and Microsoft OneDrive. This saves space and also makes sharing easier. More importantly, it keeps the documents safe in the event your computer dies.

Ensure that crucial documents are accessible to key individuals, such as your spouse or executor. Set an annual reminder to verify that all parties have the latest information. Consider maintaining a physical or digital “In Case of Emergency” folder that includes instructions on where important documents can be found.

Disposing of Documents

Inspired to declutter? Great! First, review each document for sensitive information like your SSN, account numbers, or signatures.

If there’s no sensitive info, it’s safe to just throw the document away.

On the other hand, if the document does have sensitive information, you should shred it. You can buy a shredder or use shredding services available at places like Office Depot or UPS.

Keeping in Clean

Organizing your financial documents is more than just a spring cleaning task; it’s an essential part of safeguarding your financial health. By systematically sorting, storing, and safely disposing of your records, you turn a potentially overwhelming chore into a streamlined routine.

It’s not only about the numbers in your accounts but how well you manage the documents behind those numbers. Annually dedicating a day to this task can bring immense clarity and security to your financial landscape. So, mark your calendar — your future self will surely appreciate the effort for the peace and order it brings.