Purge your financial paperwork

By Liz Pulliam Weston

If "the paperless society" is a cliché, so is complaining that we're still deluged with the stuff. So let's do something about it.

If your filing cabinets are bulging, your desk is under siege and your closets are stuffed with banker's boxes, you may find help in the following primer on what paperwork you really need and what you can ditch. Before we start, though, keep in mind these three principles:

• Think "seven to life." It's not a prison sentence, just the range of time you should keep your most vital paperwork. Most tax-related documents should be kept for seven years, or -- if the document deals with a potentially taxable investment or asset -- for as long as you own the asset, plus seven years. There are only a few documents you need to keep for life, and these typically reflect milestones: birth, death and marriage certificates, adoption papers and divorce decrees, for example.

• Most documents you're likely to need can be re-created. You can order certified copies of those certificates, for example; and financial institutions are required to keep copies of your bank, brokerage and credit card statements for seven years. You may face hassles, expense and delays in getting those re-creations, which is why you want to have your own document storage system. But you shouldn't panic if you lose or shred something that turns out to be important, and you should never -- ever -- risk your life trying to retrieve mere paperwork in a disaster.

• Electronic is OK. The IRS has long accepted electronic records in place of paper. If you want to scan or download your documents into your computer instead of keeping them in physical form, that's probably fine -- just check with your accountant first to make sure he or she has no objections.

What goes, what stays

Now, on to the various categories of paper clutter and what you can do about them:

Autos. Keep your paperwork -- registrations, repair receipts, warranties, user manuals -- as long as you own the vehicle. You may want to keep copies of title transfer paperwork for a few years after you dispose of the car.

Bank accounts. If you still get canceled checks from your bank, you can dispose of them after a year if they're not related to taxes or the purchase of a valuable asset. Keep bank statements for seven years, particularly if you don't get canceled checks back. ATM receipts and deposit slips can be discarded as soon as you check them against your monthly statements.

Bills. If you're not using them to support deductions, you generally can shred them after six months to a year. If you discontinue a service, though, consider hanging on to your final statement that shows your account paid in full for at least a few years.

Credit accounts. Credit card statements can be dumped after a year if you don't need them for tax purposes. Credit card receipts can be pitched after you compare them to your monthly statement (unless, again, they're tax-related or show the purchase of a valuable item). If you get paper receipts for other loan payments, keep them until the loan is paid in full. Keep any paperwork relating to a paid collection account indefinitely; collection agencies have been known to sell these accounts, even though they're paid, so you'll want proof you've satisfied the debt.

Continued: Employment records

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