Financial records to keep, and ones to throw away

Some handy guidelines to organize paperwork

Getting started

Your Money

January 18, 2004|By Carolyn Bigda

It takes a lot of paperwork to secure a loan, rent an apartment or do just about anything serious. And with W-2 forms and other annual statements infiltrating your mailbox at this time of year, now is a good time to organize your financial records.

So pick up one of those accordion folders and follow these guidelines on how to build a smart library of your financial history:

Personal papers

Birth and marriage certificates (and divorce papers if you've been unlucky enough to reach that stage already) should be stored someplace where they won't be destroyed by fire or flood. Keep them in a bank safe deposit box or in your lawyer's office if you have an attorney.


Hold on to tax returns and any supporting material, such as canceled checks or receipts for charitable donations or student loan payments. The Internal Revenue Service has three years to audit a return, or six years if the agency suspects you've failed to report more than 25 percent of your gross income. To be safe, financial advisers recommend keeping everything for seven years.

Another reason to save them: Banks may require two years of tax returns when you apply for a mortgage.


Hang on to at least one month's worth of paycheck stubs, which are often required when applying for a credit card or mortgage. Also, check your last pay stub against the W-2 form to ensure the correct income has been reported - and paid to you.

Credit card statements

Match receipts with your credit card statement and then toss them. One exception: Save receipts for items that are insured or have warranties and store them along with the related credit-card statement and policy. Throw away other statements with routine charges.

Investments and savings

Keep your most current 401(k) statement, as well as the latest mutual fund and brokerage reports. The same goes for bank statements.

According to, you also should keep records of any non-deductible IRA contributions indefinitely to prevent paying additional taxes when you eventually withdraw funds. In addition, securities sales or purchase receipts should be handy in order to show capital gains or losses for tax purposes.


Titles to cars and other property, as well as renter's insurance policies and leases should be kept in a secure location.


When becoming a homeowner, document the original purchase price and file any records about later renovations. If you're the seller, hang on to paperwork for costs like legal fees and broker commissions for six years. Again, the reason is for taxes: Both renovations and selling costs get added to the original purchase price of your home, helping reduce capital gains taxes when you sell.


If you're just starting out and haven't built much of a credit history, keep a year's payment history for rent or utilities.

Write to Carolyn Bigda in care of Your Money, Room 400, 435 N. Michigan Ave., Chicago, Ill. 60611 or via e-mail at

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