Going Paperless: What to keep?

Disclaimer: The information I am sharing today is for informational purposes only and should not be considered legal or financial advice. I am not a lawyer, I am not a tax attorney, I am not an accountant. I am sharing with you my personal practices. Before making legal or financial decisions, please consult your tax attorney or accountant. This is information I have decided to be best for me and my family after consulting websites and other references that I trust.

Ok. Now that is out of the way, I am going to share with you an answer to a question I get often! 

“I want to go paperless, but where do I start? I have so much paperwork and I don’t want to scan it all.”

Great news! You can likely toss the majority of the papers you have in your filing cabinet. I am going to go one category at a time.

If you are just getting started with going paperless I highly recommend that you check out this blogpost and video HERE. 

The first thing you are going to need to do is start sorting your papers into categories. You can do one of 2 things. As you go through each paper, decide if you are keeping it before putting it in the proper category OR you can categorize everything and then take out what you don’t need before you begin scanning.

AUTO:

Here is what you need to keep in the automotive category.

1. Any receipt, warranty, or receipt for repairs or purchases relating to a vehicle you currently own.

2. Titles for vehicles you currently own.

3. The pay-off statement for all paid loans for vehicles showing a zero balance.

4. Current insurance paperwork.

What can go? Anything else! That oil change receipt from 2 cars ago? It can go! Your auto insurance paperwork from last year? As long as you have your current insurance information (this can usually be found on the website or app of your insurance provider) you can shred all of the other auto insurance paperwork.

MEDICAL:

This category is to your discretion. I like to keep records of all medical procedures or doctor visit summaries that I might like to go back and reference. I had a huge folder for the birth of each of my children. I went through these and only chose the documents I might want to go back and reference and kept those. 

MEDICAL INSURANCE:

You will want to keep:

1. The final statement showing a zero balance for any medical bills.

2. Current medical insurance policies.

3. Any currently pending medical insurance statements or medical bills that are still pending.

FINANCIAL:

1. Bank statements for the past year. I download these from my bank’s website. Unless a bank statement is used for tax purposes from the past 7 years or less, it can go.

2. All paid for loan statements showing a zero balance.

3. Loans - The last statement showing your last payment. You can keep this until your next statement comes in showing your last payment.

4. Credit card statements - keep until you get your next statement in showing your previous payment. Only keep this longer if you need it to support your tax return.

5. Investment statements - keep for one year.

TAX DOCUMENTS:

1. Keep all tax returns and supporting documents for the past 7 years.

2. Only keep the tax returns for the past 7 years, no need to keep all of the supporting documents unless you are under a tax audit.

OTHER: 

1. Pay stubs (only for the past year). For most of us, this is available online so there is no need to keep these.

2. Leases - keep 7 years.

3. Certifications/education credentials - keep an original or scanned copy forever.

HOME

1. Mortgage loan payoff - keep forever.

2. Home improvement records and receipts - keep until after the sale of your home.

Items to trash:

1. All past utility statements (unless they are being used for tax purposes.)

2. Any receipts for items you will not be returning or not used for tax purposes.

Items to NOT scan. Keep the originals.

1. Car titles to vehicles you currently own.

2. Birth certificates

3. Social security cards

4. Passports

5. Marriage certificates

6. Death certificates

7. Notarized documents (such as a will)

8. Diplomas

Final thoughts: You need a good shredder. Many of the documents in our filing cabinets need to be shredded. Be sure to shred anything that has personal information on it. I always err on the side of caution with this. I have never had my identity stolen, but I hear that it’s awful. 

Here is an extra note: Consumer reports guru, Clark Howard, recommends keeping 3 copies of these documents, in 3 different places. I currently only have 2, so I need to add one more. These can easily be backed up on a large flash drive like this one HERE. While having everything on a tiny flash drive might seem scary, it is actually much more secure. If there is a looming natural disaster headed your way, you can easily tuck a flash drive into a suitcase to take with you. Or if there was a fire in your home, it is likely that one of the 3 flash-drives could be saved versus everything being in a filing cabinet. My external hard drive is on the list of things that I would quickly grab in either of these cases if I had the opportunity to. 

Going paperless is one of the best decisions I have made to keep clutter at bay in my home. I no longer deal with finding things in a filing cabinet or spending a lot time filing. I spend maybe 30 minutes every 2 months scanning in my documents. You can find the blog post and video on how I deal with daily paper HERE. 

If you have any specific questions, feel free to ask in the comments, or ask your tax professional. 

Finally conquering paper clutter has added a large amount of margin to my life and I know it will to yours too!