Remember that every piece of paper, record, and document has its own life cycle. Documents are created to serve certain purposes. Once they complete their function, they retire, get shredded, and disposed of. You need to organize permanent and temporary records differently.

How to

Keep visualizing this analogy as you separate your permanent, active, and temporary records.

Permanent Records

- Tax returns over the years
  *We advise you to keep tax returns in your permanent records pile simply because the IRS destroys original 1040 forms after three years, but you and your heirs might need to refer to this information for any estate settlement.
- Marriage licenses, divorce, and separation agreements
- Birth certificates and death certificates
- Social security cards
- Wills, living wills, and advanced medical directives
- Trusts, estate documents
- Power of Attorneys
- Deed, and records of paid mortgages

Active Records

- Contracts
- Insurance documents and the most recent renewed policies
- Stock certificates and records
- Property records - including settlement statement and closing cost (you might need this information if you decide to sell the property)
- Home and property improvement for tax purposes and future sale
- Pensions and retirement plans
- Disputed records - until dispute is resolved

Temporary Records

- Receipts saved for budgeting purposes, such as:
  - Grocery
  - Personal
  - Miscellaneous receipts
- Receipts to support billing/monthly statements, such as:
  - Charges on credit and debit cards and ATM withdrawals

Keep in mind that most financial transactions are now done electronically, so you need to use logic and common sense as you shred or keep any documents. There is no need to have papers all over the house if you can dedicate that information to a few files on your computer. Scanning and electronic filing is an option to help you keep all financial information at your fingertips.

Practice

Now you know about all the types of records you may have. Think of paying it forward and discuss how you keep your records organized with a friend or a family member.

Congratulations! You can move on to Chapter 3. What should be my guide to clean financial clutter?

To review the full module on Cleaning financial clutter, click here.