Money sends us into a panic. Organizing your finances with this checklist can help.
It’s time to spring clean your finances.
The No. 1 source of stress for Americans is money, according to the American Psychological Association. About three in four (72%) say they feel stressed about money at least some of the time, and nearly one in four (22%) say they experience extreme stress about money. And that takes its toll on our mental and physical wellbeing, as those with money stress have higher rates of depression, anxiety, migranes, high blood pressure and even heart attacks.
So what can you do about your money stress? One big step in the right direction is simply to get organized about your finances, so you know where all your financial documents are kept, and what to keep and what to toss, experts say. Nick Holeman, a certified financial planner at investing app Betterment, says that it’s key you do this both for your own sanity — it’s hard to feel in control when you’re living amidst stacks and stacks of financial papers –and because it helps you make smarter money decisions around what you’re saving, investing and spending. “People who are aware of what is going on with their finances tend to make better financial decisions,” he notes.
The good news: You can ditch paper almost entirely if you like, says Holeman. Mark Durrenberger, the author of The Modern Day Millionaire, stores copies of many of his financial documents electronically on Dropbox ; Holeman recommends OnePassword and DropBox. If you’re more old school, Jennifer McDermott, a consumer advocate at finder.com, says you can keep documents in both a fire and flood-proof filing cabinet and in a spot like Dropbox.
So what should you keep — and for how long — and what should you toss? This handy checklist can help:
Toss them in about a year or less:
- Receipts: “95% of the time holding onto receipts is unnecessary and just clutters things up,” says Durrenberger. Toss these when you get them. The exceptions are for anything you’ll deduct from taxes (this might include childcare, business and medical expenses, as well as charitable donations), things you might need to submit for reimbursement (like gas and healthcare costs), and receipts for major purchases “in case you need to return or something is wrong and you need proof of purchase,” says Durrenberger. Typically, you should keep anything related to your taxes for about 6 years, says Holeman.
- Cable, utility, and phone bills: Make sure these bills were correct and paid on time, and then you can typically toss them. Exceptions are for when you deduct these from your taxes (in that case, it may be worth it to keep these electronically for 7 years) or need to get reimbursed for these items.
- Monthly bank and credit card statements. Ryan Boggs, an investment adviser representative at FourStar Wealth Advisors, points out that most of these are easily available for you to grab online so you likely don’t need to save them. Make sure you’ve checked them each month and then you can toss them. The exception: “If itemizing your deductions such as in business, you might want to keep the whole statement as the itemized charges/deductions or deposits will be listed on the full statement,” he explains.
- Medical bills. Make sure they’re correct and paid, then toss. Exceptions are if you need these bills for tax purposes and often when have a healthcare savings account and will submit items for reimbursement or for proof of a service, says Holeman.
- Year-end investment statements. Lauren Klein, a financial advisor and owner of Klein Financial Advisors, says you should keep these for a year or until the new statement comes out. (These are also typically online for you at the investment firm.) For peace of mind, Carla Blair-Gamblian, a credit expert at Veterans United Home Loans, also keeps her quarterly statements for investment accounts. “I keep my quarterly investment statements (401k, IRA, Education Funds, etc.) until the new statement comes out. Then I toss the old one. These 3 are so if something happens to me my family knows where my largest funds/assets are,” she says.
Scan and/or keep hard copies for years:
- Tax-related documents. Durrenberger says that you should keep full records of all tax related documents — including “W-2s from an employer, documentation of any itemized or business expenses, 1099s from bank or investment accounts, etc. — for about 7 years. While, in general, “the IRS has 3 years after you’ve filed to challenge anything on your return” … there are circumstances where they can ask about older returns, so “to be on the safe side I recommend holding tax related items for 7 years,” he says. Klein adds that you should “keep tax forms for retirement accounts such as IRAs until seven years after the accounts are fully depleted.”
- Stock purchase or inherited stock documents. “Keep stock purchase records that show the initial purchase price for individual stocks and mutual funds so you can calculate your basis when you sell them,” says Klein. “Keep records of inherited stocks or funds, including the value on the day the original owner died so you can calculate your basis when you sell them.”
- Insurance policies. Keep documentation of the full policy — that means those pages of fine print — for homeowner’s, life, auto, disability and other insurance policies. You only toss these when you no longer are covered by that company.
- Estate planning and other legal documents. Keep full documentation of all wills, trusts, health care proxies and other estate planning documents. You should also keep other legal documents like birth certificates, marriage license, divorce papers, passports forever, financial expert Dave Ramsey recommends. Durrenberger says that these documents are “the only things which you’ll want to keep hard copies of.” Put them somewhere safe like a fireproof safe in your home.
- Home-related documents. “Keep deeds, titles, and receipts for your home, including purchase price, mortgage receipts, and major improvements for as long as you own your home,” says Klein. “If you sell your house at a profit of $500K or more, certain expenses may help lower your tax bill. (You can toss these docs three years after selling your house.)”
© 2018 Dow Jones & Company, Inc. All Rights Reserved