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Financial Documents: Keep, Scan or Shred?

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A few years ago, I had two banker’s boxes full of financial documents I just accumulated over time. Then, one day, I decided I would go through all those documents and actually decide whether I should keep, scan, or shred them. I purchased a Fujitsu ScanSnap S300 to scan any important documents and then some random crosscut shredder from Staples to shred the non-essential documents. Two bags of recycling later, I had rid my life of years of credit card and bank statements I’d never need and put all my important documents in a secure folder on my computer.

Here was my approach:

This post is part of the 2011 Spring Cleaning Week!


Keep These Documents

For the documents listed below, you want to keep the original in a safe place, be it a safe deposit box or just a safe place in your home; and protected. You should also scan these so you have a backup in case something happens to the originals.

  • Any government issued official document – Social security cards, birth certificate, passports, etc.
  • Titles – Titles of ownership to your car, home, etc.
  • Insurance policies
  • Tax returns – keep these for seven years, longer if you filed a fraudulent return. :) Keep the documentation that supports your tax return for seven years as well (like receipts for donations).
  • IRA contribution records – You’ll want to keep these forever as they are proof of contributions.
  • Any warranties or guarantees – You’ll want to keep these for as long as the own the item warrantied/guaranteed.

Scan These Documents

These are documents where you want to keep them but the original has no added importance.

  • Brokerage statements – Keep a copy of statements for tax purposes (to prove cost basis and capital gains), you can shred the rest.
  • Big Ticket Purchase Receipts – For insurance purposes, keep a copy of the receipts from purchases you’d claim on an insurance claim should something happen. Keep receipts for purchases like televisions, jewelry, and other expensive items, shred the rest.
  • Home improvements – Keep records of any improvements to your home for tax basis purposes when you sell.
  • Pay stubs – You can scan these and keep them until you receive you W-2.
  • Medical bills – Scan and keep these in case you have a dispute or they support a tax deduction, otherwise shred.

Shred These Documents

You don’t need to keep these documents past the last one you received and in most cases they are available online. In fact, I’d recommend that you sign up for paperless statements whenever possible (to reduce fraud) and just review them online.

  • Bank and credit card statements – Review them for any erroneous charges or signs of fraud, then shred them.
  • Bills – Review for accuracy and then you can shred them.

Once you go through your old documents, it’s important to have a system for any new ones. In general, I let financial documents accumulate into a pile and then I batch file/scan/shred them. I don’t deal with each piece as it comes in unless it’s a clear “shred” item like a credit card statement (I use paperless statements so that’s a bad example for me). I prefer dealing with it in batches because it’s easier for me but you can do it however you like.

{ 26 comments, please add your thoughts now! }

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26 Responses to “Financial Documents: Keep, Scan or Shred?”

  1. Dean says:

    Nice article, thanks Jim. As I sit here with my new-year shred pile of the old tax returns rotated from my bankers’ box.

    One that I’ve never gotten a straight answer on — medical records. Some articles say to save them forever. But nobody says which ones should be saved forever. I hardly think I should save the documentation for my doctor visit with a chest cold. What about the billing statement from the E.R. when my son got stitches? Even with serious stuff, they don’t give you much more than a billing statement — the doctors have your “charts”. There’s a whole scale of relevance here for what seems like worth saving.

    I’ve relegated to shredding everything except major medical procedures — surgery, etc.

    Any medical professionals care to weigh in? What would this be useful for anyway?

    • billsnider says:

      I keep a summary of my medical records noting date, doctor, location and treatment. I also shred after three years. This greatly reduces my clutter. If i need to go back (which i have never done), I can call the doctor noted on my chart.

      Bill Snider

  2. Aaron says:

    I’m surprised that so many people recommend just viewing bank and credit card statements online. In my experience, you’re lucky to get access to more than 1-2 years of statements online. I would augment the advice to include saving or “printing” them to PDF files, for storage on your computer. Just in case, because it’s quite cheap and easy.

    • Frugal says:

      I second to what you said.

      I also do reconciliations. For that reason, I switch to paperless statements, download them and switch back to paper. This way, I get a papercopy for recon purpose and PDFs for storage.

    • Strebkr says:

      Print to PDF is the method I use. Its great as long as you have a rock solid computer backup method in place.

      Chase for example makes it big point that they save 7 years of statements. Thats all nice and dandy until you close an account without having all the PDFs saved. The minute you close the account your history is gone. I refinanced a mortgage away from them and tried to go back to look for something I forgot to print and it was gone.

  3. nickel says:

    Better yet, switch your bank and credit card statements to paperless so you can just review them online.

  4. Shirley says:

    Some Credit Cards have a downloadable year-end pdf file on your account page. That makes it a snap to print and/or save with very little hassle.

  5. Chuck says:

    The IRA thing only matters if you make non-deductible contributions. IRAs are presumed to be fully taxable (which is true if you’ve only made deductible contributions), and Roth IRAs are not taxable. I don’t see how records of IRA contributions would help except for non-deductible traditional IRA contributions.

    • billsnider says:

      I agree on deductible IRA contributions. For this reason i only keep the last three years of paper. I also have it summarized in an Excel spreadsheet.

      Bill Snider

  6. skylog says:

    i keep everything in pdf’s on my computer. most everything that i need can be downloaded, and for those that can’t i scan them.

    i keep everything, forever. i know it may not be needed, but space is not an issue and i have got the system i use down to a science. needless to say, i have multiple backups in multiple locations.

    i can give one example where keeping my cable bill saved me a ton of money. i was a comcast customer, but switched to another provider when my promo was over. after some time with the new provider, i was able to go back to comcast and get a promo deal once again. even with the deal, the service i was able to get for the cost i had to pay was not really that great. that said, the salesman asked about my previous service, and when he found out i was an old comcast customer, he told me if i could provide an old bill i would qualify for a “win back” promo. i now pay less than i ever did for more than i ever had.

  7. neerpatel says:

    Has anyone scanned/downloaded documents and attached them to Quicken?

    I’ve lost one of my chase credit cards, and I lost all the online statements. Luckily, I was able go to a branch and request copies of them, which I pdf-ed.

    BTW, great articles!!

    • Strebkr says:

      I tried that for awhile and my quicken file ballooned in size. It just got way to big to handle. I now save them in folders outside of quicken.

  8. eric says:

    I need a good quality shredder and get through all the paperwork that I’ve kept for way too long.

  9. Jackie says:

    Jim,

    This is useful info. Now what are your thoughts on saving every receipt for oil changes, new tires, servicing on cars, etc? My husband swears you need this stuff to sell a used car and my file cabinet is over-flowing. Please talk to him so that I can eventually dig out from car paperwork and find my financial docs for scanning.

    :)

  10. zapeta says:

    I don’t really scan. I get a lot of paperless statements and I don’t bother downloading most of them since they are available online. I keep the important things you mentioned and spend a lot of time shredding the rest.

  11. Shirley says:

    When my parents died my brother and I were left with their paper files. They kept seemingly everything. We shredded for three days, year by year, and only kept the previous seven years and certified documents like marriage and birth certificates and his armed service entry and discharge.

    At the same time I documented their important and/or memorable events with date and location, for ‘future genealogists’ if ever needed. This sheet went into a box with the certified hard copies. In just three more years we’ll be down to just that one box. :-)

    Since then we both go through and sort our paper files annually. Our kids may never know how lucky they are!

  12. dude says:

    Let me start by saying I love Shirley’s method for her parents’ papers.

    I get my pay stubs electronically … do you recommend saving electronic copies until getting the W-2? I have access online.

    • Shirley says:

      Thank you, dude! LOL!

      I would suggest putting the dates and totals in a simple excel spreadsheet. Keep that until after you have gotten your W2, filed your tax returns, and had them accepted and verified.

      The little amount of HD space (50-100kb) that it will take up is well worth knowing you have the info on hand if your online info is inaccessible. Next year, delete the totals and start over.

  13. I try to get a lot of my documents in electronic form, but I can never decide whether I truly want to be paperless or whether I want binders filled with paper. There’s just something about having them in hard copy in organized binders that appeals to me.

  14. govenar says:

    Using a scanner with an Automatic Document Feeder makes it a lot easier to scan a bunch of things at once. The one I have is Epson WorkForce GT-1500.

  15. Beebee says:

    Great article! My boyfriend saves every single receipt and it drives me insane. I file the important ones in a organizer, but I would prefer online folders. I definitely need to invest in a scanner! I hate clutter! How much can I expect to spend on decent business scanner?

  16. Andrew Jorgensen says:

    Great post! Thank you so much for the insight. I came across a great (although a little expensive) that would be helpful for anyone looking to get started on this type of project: http://www.machinerunner.com/Scan-Store-Shred-Package.

    Let me know what you think! Worth $999???


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