The Importance of Maintaining Your Financial Records

An important part of managing your personal finances is keeping your financial records organized. Whether it is maintaining tax records for a potential audit or to verify your income or a Social Security card for wage reporting purposes, there may be times when you need to locate financial records or important documents. When that occurs you want to be able to locate your information quickly.

By taking the time to get organized and clear out old documents that you no longer need to store you’ll be able to locate what you need when you need it saving yourself time and potential frustration.

If you tend to keep things because you might need it someday, your desk or home financial record storage area is probably overflowing with documents you may not need. Take the time to sort through these non-essential records and discard anything that is not necessary to hold on to. To do this you will need to understand what records are non-essential and which records you need to retain and for how long.

Documents you should keep are ones that you may have difficulty obtaining copies of when you need them, such as;

  • Tax returns
  • Legal documents
  • Insurance policies and claims
  • Proof of identity
  • Social Security records

If there are documents you can easily get copies of or retrieve from a website, such as bank statements, credit card statements, online banking activity, etc., then you probably do not need to keep paper copies of this information.

One of the big questions is, how long should you keep these records? Generally, a good rule of thumb is to keep financial records only as long as necessary or required by the situation. For example, you may only want to keep copies of bills, ATM and credit-card receipts only temporarily, until you have checked them against your statements or have confirmed payments have been posted. On the other hand, if a document is legal in nature or difficult to replace, you will want to hold onto it longer, maybe even indefinitely.

Some documents, such as IRS documents, have specific timetables. The IRS generally recommends that taxpayers keep federal tax returns and supporting documentation for a minimum of three years up to seven years after the date of the filing.

Here is a sample of some documents and the recommended time you should keep them.

Records to keep less than one year:

  • Bank statements
  • Credit card statements
  • Utility bills
  • Auto and homeowners insurance statements (until you receive the renewal)

Records to keep for more than one year:

  • Tax returns and supporting documents (up to seven years)
  • Mortgage contracts (until the mortgage is no longer in effect)
  • Property appraisals (likely as long as you own the property)
  • Annual retirement and investment statements
  • Receipts for major purchases and home improvements (at least until the warranty period expires)

Records to keep indefinitely:

  • Birth, death and marriage certificates
  • Adoption records
  • Citizenship and military discharge papers
  • Social Security card

These are general guidelines and not hard and fast rules. Your personal circumstances may warrant keeping these records for shorter or longer time periods and maybe even indefinitely.

The important thing is to take the time to get organized. Make sure you have the documents you need and they are easy to locate. Declutter anything you don’t need and it will make you feel more in control of your financial life.

Finally, when you are ready to discard old documents don’t just throw them away. To protect yourself from confidential information falling into the wrong hands, invest in a quality shredder. To avoid identity theft invest in a shredder that will cut and cross cut your documents. Keeping your records organized and your identity safe are critical to maintaining your financial records.

Written by:  Dennis Kelley, Managing Partner

These are the opinions of Dennis Kelley and not necessarily those of Cambridge, are for information purposes only, and should not be construed or acted upon as individualized investment advice.  Investing involves risk.  Depending on the types of investments, there may be varying degrees of risk.  Investors should be prepared to bear loss, including total loss of principal.  The strategies discussed herein are not designed based on the individual needs of any one specific client or investor.  In other words, it is not a customized strategy designed on the specific financial circumstances of the client.  However, prior to opening an account, Cambridge will consult with you to determine if your financial objectives are appropriate for investing in the model.  You are also provided the opportunity to place reasonable restrictions on the securities held in your account.