Clearing out financial clutter
You may be anxious to get started, but it is hard to get motivated when you are knee-deep in paperwork. Getting your financial house organized is a great way to begin on your path toward financial wellness. But before you bulldoze that pile, you should know that some things are worth hanging on to. The key is to know what keep and what to toss.
- Grocery receipts and other nondeductible expense receipts and statements can be destroyed after they have been recorded for budgeting purposes.
- Paycheck stubs should be checked against your W-2. If it’s a match, you can toss them. If not, request a revised W-2, called a W-2c.
- canceled checks should generally be saved for three years. Keep those related to your taxes and business expenses permanently.
- Utility bill stubs may be destroyed after recording, however, you may wish to hold onto these for a year to compare monthly costs.
- Household documents pertaining to buying, selling or improving your home should be kept as long as you own the home.
- Receipts from major purchases should be kept as long as you have the item.
- Credit card receipts can be destroyed once you have reconciled with your monthly statement. Additionally, credit card monthly statements can be destroyed on an annual basis.
- Individual tax return documents should be kept for seven years, according to the Internal Revenue Service (IRS). The IRS has three years from your filing date to audit your return if it suspects good faith errors. However, the IRS has six years to challenge your return if it thinks you underreported your gross income by 25 percent or more.
Finally, before taking out the trash, be sure that all identifying information has been destroyed to avoid your personal information falling into the wrong hands. For more information about keeping your identity safe, read How to: Protect yourself from identity theft.
For more information on this topic, read Karen McCall's blog post on clearing out the clutter.