Tips for Record Keeping
We always get the following questions from our clients: “How long do I need to keep important records?” We believe the problem is people often look at their filing cabinets, drawers and file boxes filled to capacity around their house wondering if they need to keep everything, or if they can begin to get rid of some of it. What is the time frame for keeping records? The answer is different for every type of record. Many records are only required to be kept for one year, some 3-7 years and others are required to be kept indefinitely. The records that are required to be kept indefinitely are pretty easy to spot. Think of these as your permanent documents like social security cards, wills, deeds, birth certificates, death certificates and marriage certificates. Use your best judgement here, and your choices will probably be sufficient. Some financial records should be held onto for longer than others, such as retirement and IRA contribution year-end statements as well as records of large purchases that may be needed later for insurance purposes. There is nothing worse than having an insurance claim on stolen or destroyed merchandise with nothing to back up your purchase value on it.
The other documents that require only a small amount of time to be held onto would be financial, bank and income statements. In most cases, requirements on these are no more than 7 years because the limitations of how long anyone can look back at them. Most often we get statements and file them away. We get another statement and we file that one away too and it happens over and over again until finally we have a file that is ten inches thick of paper we no longer need. The best advice we can give is to keep financial records throughout the year, and when the year-end statements come you can discard the ones you saved through the year and just keep the year-end statement. This will cut down on the amount of space being taken up by documents. However, if you are more technologically oriented you can scan all the paperwork and store it digitally. This cuts down on the amount of physical space being used drastically, because you can have years and years of documents stored on an individual thumb drive.
The point of keeping your records is to back up and support your future needs. Just be sure you keep records in accordance to those needs, and you will be free of clutter.