Ditch The Documents!

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Are you becoming buried in paper? If "junk" mail is overtaking "real" mail, maybe it's time to take control. Opt out of the unnecessary mailbox clutter; get bills electronically, and regularly purge your paper files. Here's how…

It's April and many individuals are finishing their tax returns while vowing to be more organized next year. According to the Solid Waste Management Coordinating Board, Americans receive more than 30 pounds of junk mail per year! Adding necessary and important documents to the mix makes it easy to get buried in all that paper. Here's how to de-clutter while retaining the important stuff.

Opt-Out!

The best "de-clutter" option is to stop the unnecessary paper coming into your mailbox. Unless you're continually in the market for a better credit card or additional life insurance, unsubscribe from pre-approved offers. The Fair Credit Reporting Act allows consumers to submit an online form at www.OptOutPrescreen.com and opt out from receiving these mailers for five years. You can permanently opt out by completing an online form and a paper confirmation. Not only will you reduce your mail, you'll also eliminate the risk that those credit card offers might fall into the wrong hands!

What about unsolicited catalogs, magazines, and sale offers? At www.dmachoice.org you can remove your name from the marketing lists that generate those mailers. You'll need to create an account on the website and then select the type of mailings you do or do not want to receive.

Get Automated!

Have you considered going paperless? Often bills, account statements and supporting documentation can be sent electronically. An automated bill-payment program will eliminate a ton of paper records as well.

But don't stop there! Look for accounts that can be consolidated or closed. Consider closing that charge card you opened at a specialty store when vacationing in San Francisco last year or that line of credit you have never used. But hold on to useful credit cards that you've had for a long time. They can boost your credit score!

Organize and Purge!

Once you've removed the clutter from your mailbox, start organizing your filing system. But before you can make headway there, know how long to retain certain documents. The general rule of thumb is to save documents used for tax preparation for seven years.

Here are more specific guidelines for the most common types of records:

  • Bank accounts - Keep monthly statements that include copies of canceled checks until you prepare your tax return for that calendar year. For tax purposes, bank deposit records for gifts and other large non-payroll-related cash receipts should be retained for seven years as evidence of the source of funds. Note: Check with your financial institution to confirm how long they maintain statements. You may not need to save hard copies if the information can be accessed electronically.
  • Credit card statements - Retain statements until that year’s tax return is filed unless needed for long term tax records, then keep with the tax return.
  • Paid invoices and bills - Unless tax-related, you can discard once the payment has been confirmed.
  • Paycheck records - Only keep the final pay record for the year which shows the annual totals.
  • Investment records - Retain evidence of the cost of an investment for seven years after the investment is sold. "Purchase" and "sale" confirmations can be disposed of once the transaction is confirmed on your statement. Monthly statements or, if available, a comprehensive year-end statement should be maintained until account is closed and information is no longer needed for tax purposes.
  • IRA records - It's important to retain records showing non-deductible contributions to an IRA. Keep for seven years after you close your IRA.

Here are some guidelines pertaining to insurance policies:

  • Homeowners/Auto - Retain the policy until there is no possibility of a claim and the policy has been replaced or the property disposed of.
  • Life - Dispose of terminated policies only when there is no cash value and no chance of reinstatement (usually five years).
  • Health - Dispose of policy only after it has totally expired or lapsed and credible coverage documentation is no longer necessary.
  • Insurance claims - Maintain documentation at least one year after payment of a claim or, if tax-related, for seven years.

Summary

Proactively managing your mail and documentation delivery methods will save you time and help you better organize your records. Identifying which documents to retain and which ones you can safely toss will help you maintain an organized filing system. And that should make next year’s tax preparation a much simpler task!

Sarah Mahaffa, CFP is a Wealth Advisor with Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. For more information, visit their website at www.bedelfinancial.com or email Sarah at smahaffa@bedelfinancial.com.

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