Which Records Should You Keep and Which Can You Ditch?

Your taxes are filed, your return should have arrived by now or is on its way—and now you’re left with a box full of bills, receipts and who knows what. With summer right around the corner, I want you to squeeze in one last bit of spring cleaning when it comes to your finances.

If you haven’t done so yet, I suggest you start by using my FinishRich File Folder System  to help you get all your financial documents organized and in one place. My File Folder System also helps you determine what important documents you need. But the fact is many of us keep too much information for way too long. (I’m guilty of this myself.)  So I’m here to help you determine what documents you can keep and which ones you can ditch.

Starting with your taxes, the fact is except in cases involving fraud, the statute of limitations on income-tax returns is only three years, so the Internal Revenue Service does not expect you to hang on to tax records and receipts for any longer than that. The main exceptions to this are if you’ve underreported your income (in which case you should keep your records for six years) or have claimed a loss from worthless securities (seven years).

Obviously, you should keep records documenting the cost basis of your home and all your other taxable investments for as long as you own them. The same goes for the basic documents concerning your retirement accounts and insurance policies, not to mention all loans and mortgages.

But don’t be shy about getting rid of old materials. Here’s a list of items you should consider throwing away (or shredding if the documents contain personal information):

  • Outdated warranties
  • Outdated instruction manuals
  • Outdated wills or trusts (provided you created a new one)
  • Canceled insurance policies
  • Credit card statements for closed tax years
  • Canceled checks for closed tax years
  • Old brokerage statements for closed tax years (unless they have cost-basis information you might eventually need)
  • Old annual reports from stocks and/or mutual funds
  • Old investment newsletters (some people keep these things for years because they paid for them—let them go!)

I hope that this information plus my FinishRich File Folder System  can help you get organized and on track! Let me know if you have ever used my File Folder System or if you have a better way to organize your finances share it below or on my Facebook!


Live Rich,

David Bach