As a grown up, you are going to be expected to keep certain documents throughout your entire life or at least for an extended period of time. Some of the paperwork you keep is going to be obvious to you, while others you may not know if you should keep them or where to store them for the long term.
WHAT IS CONSIDERED IMPORTANT ENOUGH TO KEEP?
One of the first things you need to decide when saving documents is what is considered important. Your birth certificate and marriage license might seem like the most obvious types, but do you need to save all of your credit card statements and tax returns? If so, for how long?
Determining what is considered important often means that you need to think ahead. Is there a specific reason you can think that you would need proof of something down the road? Of course, if you aren’t sure, you may end up hoarding a ton of useless paperwork for years…which does you no good. I knew someone once who still had his pay stubs from his first job 20 years later. This is totally unnecessary. Does this mean you shouldn’t keep them for a short period of time? Back in the later 20th century, or the 1990’s, most of our paperwork was – well- paper. So, to make sure there were no errors on your W-2’s at tax time, we saved pay stubs at least for the year to check for inaccuracies.
Nowadays, everything is digital, so while it is still important that you keep SOME documentation – especially if you are an independent contractor- you probably won’t need to hold on to ever paystub.
On the flip side, I have known young people who did NOT think it was important to save tax returns and receipts, for example, and risked being audited because they didn’t save the appropriate paperwork. So, always consider what you may need to keep and for how long.
WHERE TO STORE IMPORTANT DOCUMENTS
Different types of documents can be stored in different places, depending on how often you may need to access them and what you may need them for in the future. For example, you may carry your social security card with you, as I do, or keep it in a fireproof safe, like my husband does. Important financial documents or wills may be kept in bank safe deposit boxes where they will be a bit more secure (but not FDIC insured).
So what are all the options?
- Accordion folder or filing cabinet – I remember my dad having a large, black, metal filing cabinet that locked which was full of papers. To this day, I don’t know what he needed all four drawers for, but like I said, back in the day paperwork was all the proof you had of anything. I have used a filing cabinet to organize important papers in the past, such as some medical records, school information for my children, car expense receipts, home repair receipts, home and auto insurance policies, etc. Basically all of the things that I considered important, but needed to be easy to access. Currently, I use an accordion folder for the same information, just more streamlined and downsized since my kids have grown.
- Fireproof safe – No matter where you decide to keep certain documents, I would definitely recommend a fireproof safe for all your valuables. Available in many sizes, these are quite affordable and offer a peace of mind when it comes to certain items you may need to keep safe. Keeping expensive jewelry, cash, and credit cards in a fireproof safe is the best way to assure those things that are valuable to you. Adding documents such as passports, marriage and divorce documents, and your home and auto deeds will serve as proof in case of an emergency.
- Bank safety deposit box – Your bank offers its customers a free small storage box to keep your most valuable possessions. Items you could include would be things that you don’t want others to be able to access such as your Will. Many often put other valuable items in their safe deposit boxes. Because it is harder for anyone, including yourself to access, you may want to put the most important documents or least used documents in one.
WHAT IMPORTANT DOCUMENTS SHOULD I KEEP AND WHERE?
- Social Security card, birth certificate, immigration papers, passports, marriage licenses, and divorce decrees: Any paperwork that proves your identity should be stored in a fireproof safe. These types of documents are hard to get replaced, especially if you don’t have another way to prove your identity. These are also the type of documents that people could use to steal your identity. These items are kept for life (passports do expire after 10 years, though), so you should do your best to keep them as safe as possible.
- Tax returns and any paperwork you used to complete your tax returns: The IRS has 7 years to decide to do an audit on a tax return, so you must keep not only your copy of your tax return, but all documentation that went with it, such as – W-2’s, health insurance information, 1099’s, receipts for anything that you may have claimed, and all the schedules that you may have filed along with it. Being able to prove that the steak dinner you claimed on your taxes WAS on your business credit card and is clearly a business expense can help save you a lot of money in fees. If you are considered self employed, or an independent contractor, it is even more important that you keep accurate records for 7 years. Keep all gas and mileage documentations, income and expense reports, and any other paperwork you use to file your taxes. These types of documents I keep in my accordion folder, but if you have a large enough safe, it wouldn’t be a bad idea to keep them in there, also. (Check out these articles for more on taxes: HOW TO BE PREPARED FOR TAXES AS AN INDEPENDENT CONTRACTOR; TAXES: WHAT YOU NEED TO KNOW)
- Credit card statements, bank statements, receipts of any bills you paid: These documents are usually kept for a very short amount of time. If you receive a paper bank statement, you can use it to check against your check register to make sure you haven’t been double charged for an item (it happens) or that there is no fraud with your account. You only need to keep this as long as it takes you to clear the items in your check register. Most banks will have digital copies of your bank statement available to you at any time, so there really is no need to even get a paper copy. Credit card statements, utility bill statements, and any other bills that you have paid you only need to keep long enough to make sure your check or online payment has cleared. If you get paper statements, it is nice to keep them at least long enough to dispute anything if needed in the short term, such as proof that you paid the bill. These are not very important, again, everything is available online anyway and most people don’t even receive paper bills, but if you are old school like me – or just old like me- then I would keep them in the filing cabinet for at least 4 months. (For more on budgeting, check out: BUDGETING FOR BEGINNERS)
- Homeowners, auto, and life insurance policies: Because these are the documents that you need in case of an emergency, I would suggest you keep these in either a fireproof safe or the bank safe deposit box. If your home burns down with your homeowners policy inside, it will take a little bit longer to get the benefits you deserve. Of course, all of these will be available through your insurance company, too, but it is good to have them accessible for whenever an emergency arises.
- College transcripts, diplomas, and awards: Many times, you need to prove your education with copies of your college transcripts and if you happen to have thought ahead and had a few printed out after graduation, good for you! I like to keep all of my school paperwork in an accordion folder or in my professional binder.
- Medical cards and medical insurance information: I personally keep my medical cards on me at all times in case of an emergency, but my husband keeps his in the safe. Because they aren’t something we use often, just for doctor appointments, he doesn’t see the need to carry them. I keep the medical insurance information (what is covered and by whom) in my accordion file to glance at whenever I need to.
- Investment and retirement statements: We usually get a statement once a year, I think, so I hang onto them in my accordion folder just to have for reference. There is no need to keep them from year to year, in my experience. There may be times when you may feel more comfortable saving these statements in a safer place.
This list of important documents and where to store them is not one size fits all. There may be some documents that I haven’t thought of, maybe because they don’t pertain to me, and there may be some on here that don’t pertain to you…or at least not yet. However, I hope this helps you see for yourself how to determine what is important and how long you need to keep something.
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