I work with many clients setting up filing systems and sorting through years and years (and YEARS!) of accumulated papers. The question I’m asked most often is, “How long should I keep paper stuff?”
As a former accountant, I’m comfortable answering. I add this disclaimer, however: when in doubt, seek advice from your tax preparer or financial advisor.
I recommend shredding documents you get rid of in these common categories:
Utility bills: Unless you take a home office deduction, there is no reason on God’s green earth to keep these. You can access your history online. I’ve automated utility bills so I get ZERO in the mail. The only papers in my “utility bills” folder is a bill from each provider with our account number and their emergency contact information.
Bank statements & credit card statements: In theory, you get your statements, you reconcile their numbers with yours and… that’s it. You don’t need to keep the statements. Pull copies of tax-related cancelled checks and pop them in your “tax return info” folder.
Investment statements: It helps to understand why you keep the ones you keep so you can better understand why it’s ok to get rid of the rest.
Certain investment data is necessary for preparing a tax return. BUT. You only need the annual statement that summarizes investments you bought or sold, interest and dividends you earned, along with details of any contributions or withdrawals to/from IRA accounts that are reportable on your tax return.
Therefore, you can shred monthly or quarterly statements from investment accounts when the new ones arrive.
Keep statements that show purchase details until you sell an investment; you’ll need purchase cost and sale price to calculate a capital gain or loss on your taxes. If your investments have been with the same firm, they’ll have that historical data. If you change firms, give them purchase information for any investments you’re transferring so they have it for future reference.
If the concept of shredding any of these on a monthly basis is too far outside your comfort zone, try keeping one year’s worth and then shred.
Consider signing up for electronic statements for any of the categories I’ve mentioned. (resist the temptation to print or you’re right back where you started!) You can still file e-statements in an electronic folder, but it significantly cuts down on the daily flow of paper into your life, and who wouldn’t love that?