A word on keeping good financial records:

“As part of getting on a budget and keeping track of their finances, clients become focused on how long to keep certain records. Given the age of technology and the new way we pay our accounts (via electronic transfer of funds or use of a debit card) some of the old rules need to be viewed differently.

“Ask your account or tax preparer how long they retain your return information and if there would be a charge to retrieve your return. Or request the data be backed up on disk. Day-to-day statements and receipts only need to be retained until you are sure the payment has been received.

“Consumers need to think ‘Why am I keeping this?’ ‘If I didn’t have it, could I retrieve it some place else?’

“Budgeting is finding a system that works to track spending, not to track paper!”

Record Retention: What to Discard

To help you avoid “document overload,” here is a list of items that you can begin tossing out today!

• Bank records such as ATM receipts, canceled checks and credit card receipts can usually be tossed after you’ve made sure the information is correct on your monthly statement. However, if your receipts will be used for tax purposes (such as for charitable contributions and business expenses), you’ll want to keep them for at least three years (six if you own a business).
• Most people can also throw away utility receipts once the bills are paid. But hang onto them if you’re deducting phone or electricity charges as home-office expenses, or if you want to keep a year’s worth of utility expenses to show a prospective home buyer how much your utilities typically cost.

Additional items that you can begin getting rid of immediately are:

• Appliance & Software Manuals – for items you no longer own
• Catalogs and magazines that come in every month – toss on a frequent basis
• Charity solicitation letters that you have not responded to – there is always another on its way to you
• Checkbooks & passbooks for accounts that have been closed for 3 years or longer
• Computer Software – toss the box, register the product and file the manual
• Credit card solicitations – Use it or lose it
• Expired and old membership cards
• Expired credit cards
• Expired store coupons
• Gifts you’ve received but did not like or have not used
• Junk Mail – Walk from the mailbox to the trash and dump them
• Obsolete computer wires, cell phones and other related equipment.
• Obsolete office supplies and computer programs
• Old business cards that you have collected but never used
• Old canceled checks with no tax consequence or benefits
• Old floppy disks – They are almost extinct
• Old letters and cards – with no sentimental value
• Old newspaper or magazine clippings
• Old receipts (that are not for large purchases)
• Old school papers
• Old tax returns (keep 3–7 years as per your accountant) toss the rest
• Outdated calendars and appointment books
• Outdated membership cards and lists
• Outdated phone lists
• Outdated to-do lists
• Out of focus photos or ones you just do not like of yourself or someone else
• Papers and manuals from an old job that are no longer relevant
• Recipes you no longer need or use
• Statement stuffers and brochures from banks, credit card and investment companies that you deem not useful or relevant
• Travel Brochures & Maps – that are outdated or that you will never need again
• Text books from college – check with your local library to see if they have an interest
• Warranties & Service Contracts – that are expired or are for products you no longer own

Methods of Disposal

At the end of the required retention period, financial records may be disposed of unless they support current audit or litigation. When destroying documents it is now a good idea to use a shredder to prevent identity theft – particularly when you are disposing of any receipts that have your credit card numbers or other personal information on them.

According to the National Crime Prevention Council, identity theft is the fastest-growing crime in the USA. About 7 million people had their identities stolen in the year ended July 2003, according to two studies done by Gartner Research and Harris Interactive.

Plus, The Fair and Accurate Credit Transactions Act, which was passed in December 2003 and goes into effect this summer, has a provision that says if you employ even one person — a nanny, a yard man — and you have their personal information for Social Security tax payment purposes, you have to shred, burn or pulverize the information before you throw it away or you could be sued or fined.