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Get Your Financial Documents Organized with These 5 Tips

It's human nature to hold on to things, especially paperwork, because you simply never know when you might need it. However, hoarding financial documents can make you a fraud or identity theft victim. Especially when you become overwhelmed by the mountain of paperwork, and make the decision to throw it all away. Fraudsters have no shame in going through your trash cans if it means they can gain access to the valuable information they need. Here are five tips to help you minimize risk while managing your financial paperwork.

Generate a system

Keeping track of mail can be overwhelming. Often, we will disregard important financial documents because of the amount of mail we receive. When we receive stacks of mail, we must decide what we keep, shred, or discard. A system to filter through all your paperwork will help you eliminate unnecessary documents. First, determine what is and is not essential. For example, coupons from a store you don't shop at will not be necessary. Throw those out! Instead, focus on finding your financial documents, including your bills, insurance, or medical history.

Get rid of outdated documents

Knowing how long to keep financial documents can also help you save from hoarding. Some financial records are optional, and others you may need to hold onto for extended periods.  An excellent start to getting rid of financial documents is going through your paperwork and deciding what you do and do not need. The IRS can audit within three years; however, a few circumstances allow them to pull up to seven years. Therefore, you should keep tax-related documents for up to seven years. Tax-related records include W-2s, receipts, and any other financial documents related to your taxes in case of an audit. Documents that are not tax-related keep for at least one year. These include your paid medical bills, credit card statements, investments, and large purchases if you need to file a dispute or proof of income. 

Store paper documents in one place

Storage of paper documents can assist you with maintaining the organization of your financial records. However, it's essential that you use a filing system that works for you. Old-fashioned filing cabinets are not a thing of the past, as you might need to store paper documents physically. A secured filing cabinet can also offer a safe way to store documents like birth certificates and social security cards. Today, fireproof file cabinets provide a way to keep records safe in an emergency.

Go digital

If you are 100% against paper documents and don't want any paper, digital files are another safe way to store your documents. Storing documents online is becoming more common. If your documents are coming by mail, and you don't wish to keep the paper copy, scan your document or take photos of your documents and load them into an online cloud like Google Drive. Another bonus to going digital is the added security and protection of storing your documents online.

Most financial institutions keep records of your financial documents online, so you can even save the documents from your online bank accounts directly to your online cloud storage. Another benefit of signing up for electronic records and e-statements is that most financial institutions will provide discounts if you go paperless.

Make it a habit to declutter 

Once a month, designate a time that you will go through your paperwork and decide what is and isn't needed. During this time, look through your house and car to see if any mail is lying or possibly misplaced. Having that once-a-month habit will not only keep you organized but will also make sure you are keeping track of important information. An organized life includes maintaining all aspects of your life, including financial documents. Learning to manage your financial records, from monthly bank statements to tax documents, will shorten the road to meeting and maintaining your goals.