March 10, 2014
Minimalist Monday: What Paper Docs to Keep & Shred (How to Purge Financial Clutter & Manage Household Records)
Now that tax season is upon us, I thought I'd share a snippet from my first minimalist book, Minimalist Monday: Declutter Your Way to a Zen Home. (You can order it in all electronic forms (PDF, Kindle, Nook, etc) here.)
Admittedly, weeding through stacks of papers isn't what I would call a good time, but it's so worth it! (It shouldn't take more than an hour or so, either).
Tip from the book: Make it a weeknight event with your favorite bottle of wine, or movie. AND DO IT NOW WHILE IT IS STILL COLD OUTSIDE.
In Zen Home, I detail my own struggle and journey with keeping paper records.
Spoiler alert: I have been on both sides of the spectrum: retaining nothing to the point where doing so hurt me, as well as being a total record keeping hypochondriac in law school. I came back to reality just in time to get married, and then Scott's papers merged with mine. (Double the trouble, but not double the fun!).
Even as a "minimalist" I knew we had too much and that I could recycle/purge most of it, yet I skipped this project for any other project I could think of. I mean, who wants to spend their free time organizing a file cabinet? Especially since there is such a small environmental reward. It wasn't like cleaning my closet, or de-cluttering the living room, or even removing stuff from my kitchen counters. All those things had shimmering, beautiful results... but my file cabinet would look the same. At least on the outside. Who would even notice my efforts!? Ugh, why bother!?
So I did nothing. For years. I just kept adding to the mound all the while justifying it under the saying, "Better safe than sorry, right?"
Our breaking point finally came about a year ago during a move. There wasn't enough room in the car for all our files. Our new home was also more than 8 hours away, so a second trip was out of the question.
Scott tried dumping the contents from the boxes into a trash bag, but it still didn't fit.
We started scanning through for items we could “purge.” Pay stubs from a decade ago seemed like a good start!
We pulled out just enough to get the (still oversized) bag in the car and called it a win -- until the trash bag started making me crazy. Every time I opened my closet there it was, staring at me. At least tucked away in the old boxes I could pretend it was organized. Now it was just a big lump of chaos.
My resolve? I tried to organize it a little by putting it into smaller boxes and bags (see below). That didn't help ease my anxiety, though, and before long I was looking for a bigger box. The truth was I needed to purge NOT "organize."
Finally, a day came where I needed a saved paper. Two hours and a nasty paper cut later, I realized I was wasting far more time going on a paper safari every few months than I'd “lose” if I just organized it once and for all (and maybe purged some more while I was at it).
We purged *and* we went ultra minimalist — paperless.
Of the documents that “remained” after the big purge, they were all scanned then shredded, with a few hard copy exceptions.
If you don't want to do all the scanning yourself (and I don't blame you), there are several document scanning services like NeatScan that will do it for you (and the fees are reasonable).
I've also seen deals on Groupon for scanning services. In fact, I had all of our family photos scanned (some 3,000 of them) through a Groupon deal.
Of course, you don't have to scan! Not all minimalists are virtual :)
If you don't scan, however, you probably want to photocopy your receipts. Most of the receipts these days fade in a few weeks and become utterly useless.
For details on what receipts to keep (and how long to keep them) as well as my super easy system for receipt keeping and maintence, she the paper records chapter in Zen Home. Note: I have paper and virtual management systems.
Generally: Keep receipts for products that come with a warranty (as long as the warranty is valid), and any receipt that is needed for tax purposes (retain it for three years, even if the warranty has expired) and big ticket items (for insurance purposes).
I recommend writing the warranty expiration date and tax expiration date at the top of the receipt for easy navigation.
All other receipts, including ATM receipts, can be purged after 30 days with some exceptions:
Paycheck Stubs — Keep for one year (shred after you have filed your taxes and compared your W2s).
Utility Bills — Keep for one year unless you're using them as a deduction (3 yrs).
Cancelled Checks/Bank Statements — Keep for one year unless needed for tax purposes (3 yrs).
Credit Card Statements — Keep until satisfied/paid off (or min. 1 year), unless needed for tax purposes (3 yrs).
Quarterly Statements — Hold all quarterly statements for investments and mortgages (or other) until you receive your annual statement. If you sell your investment, hold on to the statement for three years after the sale.
IRS/Tax Returns — The IRS can audit you for no reason for up to three years after you file a tax return. Thus, you want to keep all your tax papers for three years. If you omit 25% of your gross income, the IRS has 6 years. If you fail to file a tax return, there is no limit. The IRS can come knocking 25 years from now. (Keep W2 forums until you start drawing Social Security).
For all other documents and their mandatory "shelf life" check out the paper records chapter in Zen Home.
One last minimalist step: Go paperless with billing and statements. If you need a bill for tax purposes, you can download it. Typically, you can access financial statements online for several years. Or you can make a note to download them each month, or once a year for all 12 months (what I do).
Automatic payments are also a great way to avoid paper piles! Some institutions will offer a lower rate for automated payments, too! I love getting minimalist with my bills and interest. Get yourself off junk mail lists, too. Resources in Zen Home.