Organize your financial documents and keep your data safe.
Looking at your desk, counter or kitchen table, you may be overwhelmed by the stacks of paper that keep getting taller. It probably seems like you get a new bill, bank statement or piece of official-looking paperwork in the mail every day.
Fortunately, you can take control of the clutter and reclaim the surfaces in your home. We’ll explain how to store your financial documents the right way, whether you maintain hard copies, digital versions or both.
That way, you’re prepared and protected no matter what money-related situation arises.
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Types of financial documents to save
As you sift through the piles, go ahead and toss those utility bills you’ve already paid (especially if they’re from more than a month ago) and the credit card offers you won’t pursue.
However, keep your eyes peeled for the following:
- Tax returns
- Documents that prove income, such as pay stubs, W-2’s and 1099s
- Documents that prove monetary assets, such as bank, investment or retirement account statements
- Estate plans (including a will, living will, power of attorney, health care proxy and beneficiary designations)
- Insurance policies for health, life, disability, auto, home, renters or other coverage
- Social security card
- Birth certificate
- Documents that prove inheritance, marriage, divorce, death or birth or adoption of a child
- Loan paperwork for your home, car, education or other obligation
- Records of real estate transactions (buying or selling)
- Proof of asset ownership (especially for your house and car)
- Medical bills
Now, it’s time to organize your financial paperwork.
Group the documents by type and then put them in chronological order.
How long to keep each type of document
The main question that comes to mind for many is, “How long should you keep tax records?”
While the Internal Revenue Service (IRS) will generally audit a return within three years, the agency could decide to review your submission six or more years after you file.
It’s therefore wise to keep your returns – and any supporting documentation – for seven years.
Here are the general retention guidelines to follow for other document types:
Document Type | Retention Period |
Pay stubs | Until you receive that year’s W-2 |
W-2s and 1099s | For as long as you keep the corresponding tax return |
Bank, investment or retirement statements | Keep annual statements indefinitely Monthly and quarterly statements can go when the new statement comes in |
Estate plans | Indefinitely |
Insurance policies | Until you get a new policy |
Social security card and birth certificate | Indefinitely |
Proof of inheritance, marriage, divorce, death or birth or adoption of a child | Indefinitely |
Loan paperwork | Until the debt is paid off |
Records of real estate transactions | Three years after closing |
Proof of asset ownership | For as long as you own the property |
Medical bills | One year after payment |
Since the above are general guidelines, it may be wise to do additional research into your situation or consult a financial professional before disposing of a potentially critical document.
If there’s any doubt, err on the side of caution, and keep the paperwork. It’s better to have it and not need it than the reverse.
Physical document storage best practices
(Image credit: Getty Images)
If you realize that you no longer need some of the documents in your possession, it’s time to break out the shredder.
Throwing them in the garbage or recycling bin whole or in large chunks is extending a written invitation to a crook to steal and profit from your sensitive data.
If you don’t own a shredder, you can often securely dispose of your unnecessary paperwork at an office supply store such as Staples (for a fee).
For the documents you need to retain, you have a few decent physical storage options, such as:
A locked cabinet is a simple solution that keeps your essential papers in your home. However, a determined thief could break the lock, and the cabinet’s contents could be damaged in a fire, flood or other natural disaster.
On the other hand, a fireproof safe offers better protection from the elements. However, it could get stolen if it’s not bolted to the floor or well-hidden.
If you’d rather keep your sensitive information offsite, a safe deposit box at your local bank offers a lot of security while keeping your documents accessible when needed. The biggest downside is having to pay a recurring fee to maintain usage rights from year to year.
No matter which option you choose, you should put the documents into labeled folders so it’s easy to find and retrieve what you need later. Doing so also helps organize your financial paperwork for your heirs.
Digital storage tips
If you’re tech-savvy, don’t want to deal with a mountain of paper, or worry about your documents getting lost, stolen or damaged, you may want to digitize your financial records.
Here’s how to turn your pile into secure and accessible ones and zeros:
- Choose a digital storage method, such as your home computer, an external drive, a cloud service (e.g., Dropbox, Google Drive, Microsoft One Drive, iCloud or Amazon Cloud Drive) or a third-party solution, such as Quicken LifeHub
- Scan and upload each document into the system, organizing it into folders
- Make sure your information is secure via features such as password protection, file encryption and two-factor authentication
- Regularly back up your data (your service provider may do this for you)
If the thought of one more password to remember is just too much, consider using a password manager.
The financial tech tool generates a new, secure password each time you log in to an app or website. All you need to do is remember the password to the password manager!
Hybrid system advantages
Your paper files could burn in a fire, but the server housing your digital copies could crash. When it comes to storing your financial documents, you can’t be too careful.
Implementing a hybrid system offers the most protection. If the physical or digital method fails, you can still access your information through the other route.
The dual approach can also help you save your financial information and documents in case of a wildfire or storm.
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