Often, there are two camps of people when it comes to wrangling financial documents: Some keep everything, every ATM receipt, every bank statement, sometimes in a drawer or box with little to no organizing principle. Others throw away (hopefully after shredding) just about everything that arrives in the mail.
The best approach is likely somewhere in between. There is a happy medium. Here, you’ll learn how to keep just what you need, organize it well, and dispose of financial documents properly when they no longer serve a purpose.
The Importance of Financial Statements
“Out of sight, out of mind” is a cliche for a reason. Once taxes are filed, paychecks are deposited, and the rent or mortgage is paid, we tend to forget about these transactions, dumping the receipts in a deep file cabinet or throwing them away altogether.
However, the consequences of financial documents and bank statements stick around long after they’ve been settled. For example, the IRS can come calling years after a person files taxes if the organization suspects that income was misreported. Or, in the event of loss or damage, having a record of purchase for big-ticket items like electronics or jewelry can make it easier to file a claim.
Keeping track of financial statements can help serve as protection or proof if a transaction is challenged or misreported. Without the statement, people might spend days trying to obtain duplicate records, when they could have just had them neatly filed in the first place.
Not everything needs to be saved forever, but some things should be safely filed away for a rainy day.
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What to Keep and For How Long
Like items in a grocery store, each type of financial document has its own expiration date. Some will be relevant years after they’ve been filed; others can be tossed within months. Here’s the general rule of thumb of how long a person should keep each statement:
Tax Documents: 6-7 Years
Keep tax documents — anything related to filing taxes — around for seven years. Why so long? The IRS can audit anyone up to three years after they file if the agency suspects that an error was made in “good faith,” aka an accident.
That also applies to the opposite situation: If a filer thinks the IRS made an error, the filer can submit an amended income tax return up to three years after the fact for a refund.
Additionally, the IRS has six years to follow up on returns if it thinks the filer underreported income substantially, meaning by 25% or more.
It’s not a bad idea to keep the tax return, in addition to supporting documents. That could include evidence of:
• Retirement plan contributions
• Charitable contributions
• Interest payments on a mortgage
• Alimony or child support payments
Record of Sales: 3 Years
From selling stock to selling a home, and every large sale in between, it could be smart to keep these records of sale for at least three years after the transaction takes place. These documents can be called up in tax-related issues.
Paycheck Stubs, Bills, Bank Statements, Investment Statements: 1 Year
If someone isn’t using direct deposit for payday, they should keep their physical paychecks for a year. Once they receive their W-2 and confirm that the amounts match, the stubs can go.
Utility bills, bank statements, and other bills should stick around for a year , just to be safe. Budgeters can use them to compare balances month over month. It also can be a helpful habit to check over bank and credit card statements each month. It’s a chance to catch and dispute fraudulent or incorrect charges. In addition, bills for services like medical treatment and auto repair should be kept for at least for a year for reference.
Investment statements that are distributed quarterly should be kept on hand until the annual statement is revealed and the numbers are lined up.
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Receipts, Resolved Credit Card Statements: Toss It
Unless purchases are logged manually, a person should feel comfortable tossing receipts almost as soon as they acquire them. As long as they don’t plan to return the item, all they should do is confirm the amount against the debit or credit card charge, then send that little slip to the trash.
Similarly, if a credit card is paid in full each month, there’s not much reason to keep the statement lying around. Again, it can be used to check charged amounts and spot mistakes or fraud, but once statements are resolved against transactions, it should be okay to ditch the statement.
Although there are suggestions for how long people should keep a statement, at the end of the day, they should trust their gut. If there’s an urge to hold on to something not listed above, keep it.
Three Ways to Store Sensitive Documents
It won’t matter what a person saves and shreds if they don’t know where to find records in the long run. Safely storing sensitive financial documents doesn’t really mean tucking them away and forgetting about them. Here are a few ways to store and organize financial records:
• Use an old-school filing system. Finding an affordable, fire-safe file box to keep statements in is already a massive step up from the bottom of a junk drawer. Everyone will have their own approach to logical filing, but it could be done by year, type of record, or institution the record comes from.
Some might be tempted to go extra safe and take this paperwork to a safety deposit box at the bank. However, if the documentation is needed, it won’t do a person much good sitting miles away in a bank vault. Keeping it close and safe is probably preferable.
• Scan and save online. Many smartphones come with the capability to scan documents, and there are other well-reviewed scanning apps on the market. Those who tend to lose paper might choose to scan everything and save it online. The only hitch is keeping up with the scanning, and saving all documents to the cloud instead of just on the phone.
• Go paperless. Many institutions offer paper-free transactions, meaning customers don’t get statements in the mail. Online banks vs. traditional banks have made this a priority. Going paperless does not mean having to log on to each site to get financial information, but it does mean a person is less likely to lose papers.
Going paperless with financial statements may require a little more work to access records — people can’t just wait for documents to arrive in the mail. But if done correctly, they can find the papers they need with the click of a few buttons.
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The Takeaway
Going paperless with records doesn’t have to be tricky or time-consuming. That’s one of the benefits of opening an online bank account like SoFi Checking and Savings. It’s easy to find the information you are looking for online, as well as to track your spending and saving in one convenient place. What’s more, SoFi offers a competitive annual percentage yield (APY) and charges no account fees, which could help your money grow faster.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.
Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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