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Financial Documents: Keep, Scan or Shred?

Posted By Jim On 01/26/2011 @ 7:09 am In Personal Finance | 26 Comments

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 [3] 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 [4]!

Keep These Documents

For the documents listed below, you want to keep the original in a safe place, be it a safe deposit box [5] 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.

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[3] Fujitsu ScanSnap S300: http://www.bargaineering.com/articles/r/amazon.php?asin=B000YA1XVG

[4] 2011 Spring Cleaning Week: http://www.bargaineering.com/articles/spring-cleaning-week.html

[5] safe deposit box: http://www.bargaineering.com/articles/how-to-use-safe-deposit-boxes.html

Thank you for reading!