How Long Do You Keep Financial Records?

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Financial Records

The average person can wind up with a lot of paperwork, bills, and other important financial documents over the years. All that stuff can get overwhelming.  While it may be tempting to hit refresh by throwing everything out, this quick fix could get you into financial hot water. Before you declutter your finances permanently, check out this guide. It outlines what you should keep on hand and what you can safely throw away about financial records.   

Loan Contracts 

Every time you take out a personal loan or line of credit, you receive a loan agreement. This document contains all the important details of these financial products, including such things as: 

  • Account number 
  • Conditions, including penalties for late payments 
  • Outstanding balance 
  • Rates 
  • Terms and payment schedules  

Knowing where this info is comes in handy if you ever have questions or concerns about your account.  

For many traditional bank loans, you’ll have a paper document, but many online direct lenders may send you an e-document. Borrowing from an online direct lender means you’ll deal with the lender one-on-one with no loan matching or other financial institutions involved. This kind of relationship makes it easy if you need them to re-send this document for your records.  

Keep these agreements until the end of their terms, at the very least. But to be safe, you may want to hang onto them for longer.  

Keep these agreements until the end of their terms, at the very least. But to be safe, you may want to hang onto them for longer.  

Taxes 

Tax season can be a stressful time of year for many people. To make sure you’re calm and collected when Tax Day arrives, keep each year’s returns organized.  

How long you should keep these documents depends on who you ask. According to the IRS, most people will only need to keep supporting documents for three years. However, the IRS may audit you as many as six years after you file if they suspect you’ve grossly underreported your income.  

To be safe, many financial advisors recommend keeping all your tax documents indefinitely.  

Financial Statements 

Banks, online direct lenders, and credit card companies send monthly account statements for your records, but you don’t need to keep them for very long. According to most experts, you should only keep these documents for 60 days.  

The only exception to this rule is if a statement is a supporting document for your tax filings. Even then, you may not have to keep a paper copy, as many financial institutions store digital copies of their statements online.  

Two months gives you more than enough time to spot any inconsistencies with your spending and earnings.  If you notice something unusual in one of these accounts, get in touch with the company that holds them.  

Bills and Receipts 

There’s no point in keeping every receipt you collect over the course of the year, so you can safely throw out that mile-long CVS bill or the check for last Valentine’s Day dinner.  

The only time you’ll want to keep these items for your records is if they’re for a major purchase or service. This is your insurance in case something goes wrong, and you need to supply proof of purchase to activate a warranty, return, or refund.  

You’ll also want to keep any bill, receipt, or invoice you claimed on your taxes. These are supporting documents the IRS will want to see if they ever audit you.  

Organize Your Bills Every Spring 

 

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Now you know the rules, keep up with your records. Make it an annual spring cleaning chore, and you’ll never be overwhelmed by the clutter again.  

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