Does Your Financial Pile Spark Joy? A Guide to Tidying Up Your Wealth
You’ve probably seen those TV shows featuring organizing consultants who help people declutter their lives. It can be surprisingly inspiring to watch others go through their closets and finally part with "useless stuff" they have unnecessarily hung onto for years. It makes you want to jump up and tackle your own mess.
But then, you shut off the TV and head into the home office to check your email before bed. That’s when reality hits. Piles of unopened envelopes fill the desktop, and drawers are stuffed with old paperwork. There is no rhyme or reason to how it is all stuffed in there.
It suddenly dawns on you: disorganized financial papers are just as worthy of a life-changing decluttering project as cleaning out a messy basement.
We often talk about building your financial "house," but nobody likes living in a cluttered house. If anything, that clutter might be costing you time looking through all your stuff, or even money if lost envelopes lead to late fees.
Here is how we can tidy up your financial clutter and bring a little more "joy" to your financial life.
Learning to Say Goodbye
The problem is that many of us do not equate holding onto financial paperwork with untidiness. We think it is "important stuff" we will need at some point. But truthfully, most of it is really not worth keeping.
You have to learn to say goodbye and discard. For example, say farewell to those ATM receipts once you have checked them against your bank statement. Once a bill payment clears, or you decide to keep a purchase, it is time to part ways with the statements or sales receipts, too.
Unless a document is needed for tax time, proof of value for insurance, or a warranty, it is probably time to get rid of it once it has been used.
The "Keep vs. Toss" Cheat Sheet
One of the biggest fears I hear from clients is, "Ric, what if I throw away something I need?" To help you sleep better at night, here is a breakdown of what you need to hang onto and for how long:
Tax Returns: Keep the most recent three years of annual returns and supporting documents. While the IRS can audit back further in extreme cases, three years is the general standard.
Bank Statements: You generally only need to keep these for one year.
Investment Documents: Keep all capital gains tax reports for three years.
Home Improvements: This is a big one. Keep property records that show improvements to your home until the house is put up for sale. These can be used to offset capital gains when the property is eventually sold.
Paystubs: If you are still working, keep these until you receive your annual W-2 form.
Medical and Utility Bills: Typically, you can dispose of utility bills after they are paid, unless you need to show utility history to a potential home buyer. For medical bills, toss them once the claim is paid, unless you are deducting the expense on your taxes.
The "Forever" File: Documentation of major loans, insurance policies, and payoff statements should be kept forever. Keep these with your birth certificates, marriage licenses, and Social Security cards in a secure spot like a safe deposit box or firebox.
Shredding: Your First Line of Defense
When we talk about protecting your retirement, we often talk about investment risk. But protecting your identity is just as important. Shredding is key when getting rid of old documents.
If a document with personal info is going away, it needs to be shredded to prevent anyone from acquiring that information. Invest in a quality paper shredder or get the okay to use one at the office. Think of the shredder as the "moat" around your financial castle—it keeps the bad guys out.
Going Digital
Going digital with your statements can help solve a lot of problems. Almost every bank and investment company now offers a paper-free option. I highly recommend you take them up on this.
However, be careful. Although e-delivery prevents physical clutter, you may still have a big mess on your hands—it will just be on your computer. You have to employ the same thinking there as with your desk: regularly go through your emails and purge the ones that are no longer relevant.
Let’s Get Started
The longer you wait to tackle that mess, the bigger that mountain of paper will grow. Make upkeep a normal routine—maybe play some music to get in the mindset for firing up that shredder.
If you feel overwhelmed, remember that having your own organizing consultant can help, and luckily, you have one already: me. Together, we can develop a strategy of what you should hang on to and what you can find joy in parting with forever.
