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. Read on to learn how to keep just what you need, organize it well, and dispose of financial documents properly when they no longer serve a purpose.
Key Points
• Tax-related documents should be retained for 3 to 7 years to cover potential audits or amended returns.
• Investment statements should be kept until the annual statement confirms the information.
• Purchase receipts, ATM slips, and most bills should be retained for one month to verify charges.
• Monthly verification of transactions on bank and credit card statements is recommended.
• Financial documents should be stored safely, using labeled folders in a file box or drawer or storing records on your computer or in the cloud.
The Importance of Financial Statements
“Out of sight, out of mind” is a cliché 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, you might spend days trying to obtain duplicate records, when you 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.
💡 Quick Tip: Make money easy. Open a bank account online so you can manage bills, deposits, transfers — all from one convenient app.
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 you should keep each statement:
Tax-Related Documents: 3–7 Years
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. However, the IRS can go back as far as seven years in some situations.
It’s not a bad idea to keep the tax return, in addition to supporting documents, for seven years to cover your bases. That could include evidence of:
• Retirement plan contributions
• Charitable contributions
• Interest payments on a mortgage
• Alimony or child support payments
• Records of stock sales
• Records of home sale
Paycheck Stubs, Certain Bills, Bank/Credit Card/Investment Statements: 1 Year
If you aren’t using direct deposit for payday, you’ll want to keep your physical paychecks for a year. Once you receive your W-2 and confirm that the amounts match, the stubs can go.
Bank and credit card statements 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.
💡 Quick Tip: Whether your check comes the first Wednesday of the month or every other Friday, if you sign up for direct deposit, you know when the money will hit your account. This is especially helpful for scheduling the payment of regular bills. No more guessing when you’ll have sufficient funds.
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Purchase receipts, ATM Slips, Most Bills: 1 Month
Unless a purchase has a warranty or is tax-related, you can generally toss the receipt once it shows up on your credit card or bank statement. This is also the case for utility bills — you only need to hold on to them long enough to verify the charges on your bank account and bank statements.
As for bank deposits/withdrawals, including mobile check deposits, you can get rid of these records as soon as the transactions show up in your bank account.
Three Ways to Store Sensitive Documents
It won’t matter what you save if you 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 means you don’t have to organize and file your financial records, but it’s still a good idea to come with a folder system on your computer so you can access what you need when you need it.
Recommended: Are Online Bank Accounts Safe?
The Takeaway
As a general rule of thumb, you want to keep any document that verifies information on your tax return for seven years, to play it safe. You can generally toss any non-tax-related financial documents (like pay stubs and bank/credit card statements) after one year, and get rid of monthly bills, ATM slips, and receipts for most purchases after one month.
With online banking, you can typically find past statements by logging into your account. Most financial institutions make electronic statements accessible for at least five years, and these statements usually come in printable formats. You can check with your bank to see how long it will keep your online monthly statements.
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