Get Organized Do Away with the Clutter of Unnecessary Documents

It is for a fact that you are unlikely to need a lot of financial documents that you store dating all the way, since you started managing your own finances. They simply create more clutter in physical and mental space than have any real value or use.

In the normal course of a day, few people find time to sort through the assortment of bills, statements and receipts that accumulate on their desks, in wallets and hand bags. It’s not a problem if you have a month’s worth of paper lying around. Anything more than that and you will have a hard time keeping your documents in order. Credit card bills, premium receipts, mobile phone and bank statements that date back to more than three years ago, should be discarded unless you have a good enough reason for keeping them.

However, there are certain documents that you need to file away in case you need them later. Such important documents include tax returns and deductions claimed in the last three years. If you have failed to declare any earnings that are over 25% of your gross income, the Internal Revenue Service (IRS) can demand that you produce all related records of previous six years.

Tax experts advise their clients to keep copies of annual bank statements that reflect the interest accumulated and 1099 and W2 forms for a period of at least six years. You can discard most of your monthly bills with the exception of the ones that reflect an investment. If you have claimed any deductions or credit, you require proof of payment in the form of a credit card statement or a receipt.

It is recommended to keep credit card records for no longer than a year. If you have any problems, you can keep them until the bank resolves it. You can use the same principle for loan records. Keep all the related paperwork intact until you have made the final settlement. After that, you will only need the document stating that you have no pending dues.

As far as possible, store all your important paperwork in a filing cabinet or place them in a safety deposit locker. If you wish to keep the physical documentation to an absolute minimum, use encrypted hardware to keep your data safe.

A lot of bills and statements are in electronic format these days. However, it is not advisable to keep these as back-up in your email accounts or on your hard disk. The former can be hacked and the latter can get damaged. It is always advisable to have back ups of e-documents at a different storage location for recovery in case of loss of files from one location.

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