I have a lot of pet peeves.
One of my biggest pet peeves: Banks and businesses that send you junk mail.
Whenever I go to my mailbox and it’s filled with promotional material, I just want to send the mail right back to them. In fact, I switched my car insurance a while ago because they just wouldn’t stop sending me mail three times a week! Ridiculous.
It’s especially ridiculous when it comes to banks. And with all the documents you get from them, it’s hard to know what to throw away and what to keep.
That’s why I want to go into what documents you should be holding onto and for how long.
How long to keep documents
Here are my frameworks for how long you should hold onto certain documents, and more importantly, why you should hold onto them.
Later, I’ll go into good ways you can keep them safe.
These are the documents you’re going to want to hold onto for your entire life — or just about.
They can be split up into two different areas:
#1. Identifying / Vital information
Identifying and vital information documents are ones that’ll identify you as, well, you. They include the following:
- Birth certificate
- Marriage certificate
- Death certificate
- Social Security card
- Government-issued ID cards
If you need it to verify your identity, you need to keep it and keep it safe at all times. If you lose it, you risk becoming a victim of identity theft and losing a lot of money.
Not to mention, you’ll also have to enter through an overly bureaucratic process to get these documents back — which you always want to avoid.
#2. Taxes / Financial information
These are things related to finances, taxes, and your estate. They include the following:
- Tax returns (electronic or hard copy)
- Tax payment history
- Life insurance policy
- Defined-benefit plan
- Inheritance records
- Legal filings
- Bank account information (routing numbers, account numbers, passwords, etc.)
Morbid rule-of-thumb: If your loved one needs to access it after you die, you’re going to want to hold onto it.
Later, we’ll give you good ways to keep these things safe for as long as possible. For now, let’s move onto our next section of documents …
Keep for 7+ years
If you have any loans you are paying off, you’re going to want to hold onto all documentation regarding them until they are paid off. This depends entirely on your financial situation and ability to pay off your loan. These documents include things like your mortgage, car loan, and student loans.
Speaking of car loans, you’re also going to want to keep your car titles until you sell them. As before, this is going to depend entirely on your financial situation (though I recommend keeping a car for at least 10 years).
Other useful information to hold onto for the long term but not quite forever are documents relating to your investments. Including stocks, bonds, CDs, and mutual funds. Hold onto your purchase confirmations of those funds until you sell them.
Keep for 3 – 7 years
The documents you should hold onto for at least seven years all have to do with taxes.
Surprise. I know.
The Internal Revenue Service (IRS) suggests that you keep records that can verify your tax information for three to seven years.
From the IRS:
“The length of time you should keep a document depends on the action, expense, or event which the document records. Generally, you must keep your records that support an item of income, deduction or credit shown on your tax return until the period of limitations for that tax return runs out.”
The period of limitations refers to the time you can go back and make a claim to your tax return or the IRS can apply additional taxes.
The IRS also includes recommendations for how long you should hold onto supporting tax documents in relation to their statute of limitations:
- Keep records for 3 years if you claim credit or refund after you filed your tax return.
- Keep records for 6 years if you forgot to report income that you should have reported and it’s more than 25% of the gross income reported on your return.
- Keep records for 7 years if you claimed a loss on “worthless securities or bad debt deduction.”
- Keep records indefinitely if you didn’t file a tax return or if you filed a fraudulent tax return.
If that’s confusing, just know that you should hold onto any document that supports the information provided on your tax return for three to seven years. This includes:
- Bank statements
- Brokerage statements
- W-2 forms
- 1099 forms
- Bills from dependent care
- Property tax information
- Charity donation receipts
Keep for one year (or less)
This section is going to contain a lot more of your month-to-month billing statements. They include:
- Bank statements
- Credit card statements
- Pay stubs
- Water bill
- Electric bill
- Gas bill
- Internet bills
- Phone bills
When it comes to the bills and credit card statements, hold onto them for one month after you receive them just in case there’s a discrepancy you need to address with the billing company.
You should also hold onto your receipts each month to make sure your credit and debit card statements are correct. Afterward, file it away in the trash.
When it comes to your bank and payment information, though, you’re going to want to hold them for at least a year as they’ll come in handy when tax season arrives. Once that year is done, though, feel free to throw them away — which brings us to …
Rev up your shredder because it’s time to throw all the following documents away:
- Pre-approved credit cards
- Loan consolidation
- Publishers Clearing House offers
- Store promotions
This is everything non-essential to your financial health and just exists to clutter your mailbox and make your mail person annoyed with you.
How to store (and destroy) your documents
For your important identification and financial information contained in the “Keep forever” section, you should store them somewhere they can exist safely long term. Here are a few suggestions:
- Safety deposit box. Your local bank or credit union should have safety deposit boxes available to rent. Fees can range anywhere from $20 to several hundred dollars a year depending on the size of the box and its location.
- Personal safe. You can also keep your documents in a sturdy, fireproof safe. Consider hiring a contractor or doing some DIY work to hide the safe to ensure further protection from thieves.
- Protected electronic file. For bank and estate information, you could also opt to keep those documents in a password encrypted file on a backed up network. This will keep it safe from things that can bring down physical documents like fire and water damage.
For documents that aren’t as vital to your identity and financial health, such as tax records and credit card statements, you can simply store them in a filing folder or a drawer in your home. Most anywhere works as long as you know where it is and can access it easily.
When it comes to protecting your identity and finances, there aren’t as many investments better than a good cross-cut shredder. Use it once you’re finished with the documents to protect yourself from identity and monetary theft. That way, you can throw away your documents knowing no one will be able to piece them together.
Keep your financial future safe
Knowing how long to keep documents is a crucial step to making sure your personal finances are in order — but it’s only one part of it. You also need to make sure you have a system in place that hedges against the downtimes while also earning you money.
That’s why I want to offer you my Free Insider’s Kit. This is a collection of the best resources I have on personal finance drawn from more than a decade teaching people how to save, invest, and earn their money.
In it, you’ll find my systems on how to build a financial system, invest, and save for any purchase passively, and how to create income streams to give you a limitless earning potential.
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