Organizing for FIRE – Financial Files

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We’ve continued our effort to organize this January and continue to make progress.  We keep our financial records pretty streamlined, but I recently looked at an official guide to how long you are supposed to retain records.  MFS Funds – formerly Massachusetts Financial has a ‘handy’ guide they publish that covers financial records from A to Z.  Unfortunately, as I compared it to what we actually do, half of the advice was absurdly ridiculous.  Here’s the MrFireStation.com guide to record keeping:

RIDICULOUS TO KEEP:

CANCELLED CHECKS – We don’t even get cancelled checks anymore and we stopped keeping them once the banks started putting images of them online.  You are supposed to keep them for 7 years – so hopefully the bank is doing that for us.  We DO have 26+ years of check registers.  We view them as a bit of a family economic history.  If I were you, I’d throw them all out – they don’t serve much purpose other reminding you how neat your handwriting once was.

HOUSEHOLD BILLS – Believe it or not, the financial experts say you should keep ordinary household bills for three years.  Who does that? – keep a cable TV bill for 36 months after it is paid?  This is why people don’t listen to ‘financial experts’, isn’t it?

CREDIT CARD STATEMENTS – It is recommended that you keep credit card statements for 3 years.  I don’t really view these as any different that household bills though.  I think once it is paid (meaning I put the check in the mail), it is fine to throw away the statement.  In 26 years x 12 months x 2 accounts = 624 instances, that has never been a problem.  I like those odds.

PAY STUBS – First off, we never keep pay stubs.  I’m not sure I have any of them from any employer I’ve ever had.  My philosophy is once the check is in my savings account, my need for them is over.  Why anyone would keep them for 3 years is beyond me.

THINGS TO KEEP IN A FILE FOLDER / BOX:

AUTO REPAIR RECORDS – We spend a lot of money keeping our cars running each year and I keep the records in a file so that when we sell them we can show the potential buyers how meticulous we have been.  That has to be worth something in resale value or time to sell, doesn’t it?

TAX RETURNS – Tax returns are another matter.  My understanding is that the IRS can audit you for up to 3 years (and find you up to 6 years later if they think there was fraud).  We’ve never been audited, but I keep the full 6 years anyway.  I have six oversized envelopes that I rotate the annual returns through.  I probably have 6 years of data files from our accountant that I keep too.  Those are more useful when we need them for something.

HOUSE CLOSING INFORMATION – I’m not sure why, but people say these records should be kept FOREVER.  Even when you have long moved from one house to another.  Since we’ve only moved a couple times, I’m fine with that.  That said, if the house burned down, I wouldn’t worry too much.  There are probably duplicates at the city/county registrar office of anything important.

LOCK THEM UP IN A SAFE:  

WILL / ESTATE INFORMATION – These are probably the most important documents in our financial lives and they are stored along with a copy of our living will and health care proxy.  In the event of the unthinkable, our son knows where to look.  My brother (a judge) would be our estate trustee and he would know to get a copy from our attorney as well.

CAR TITLES – In order to sell your cars, you have to fill out the box on the title form and send those to the state so they can collect their tax.  Knowing how hard it is to fight through the bureaucracy to update a driver’s license, I think it is important to keep these safe and ready.

PASSPORTS / BIRTH CERTIFICATES – These are the most commonly accessed documents in our safe.  It seems like every couple months we are looking for them and so we keep them right on top.  We recently signed up for TSA Pre-Check and had brought the passports, birth certificates, and marriage license with us (just in case).

INVESTMENT ORIGINALS – Where we have unique investments and have made loans, we keep the original paperwork in the safe.  Some of these things would be practically ‘lost’ if they were misplaced, so the safe keeps them safe.  🙂

MASTER LIST OF EVERYTHING – We also have a ‘master information file’ of every account we own, insurance numbers, travel records, and past employer data that is over 7 single-spaced pages.   We have three copies of the document that I update semi-regularly.  Two are in fire-safe locations (one with our will) and one is online.

ONLINE:  Almost everything else I have – financial file wise – is ‘locked’ up digitally.  We use Carbonite as our online backup tool.  We’ve had it active since 2013 and works pretty well.  It updates almost every file we have (except videos) – spreadsheets, PDF statements, and photos in what should be a secure cloud-based place.  For redundancy, I also have a copy of everything on a massive hard drive in the safe – although I haven’t ever needed it.

As always, I am no legal expert in these matters, so please take my observations as input into your own plans and not legal advice.  While we are not absurdly organized, it is very rare for us to say “where did we put such-and-such?”  I hope if nothing else, the next generation of our family with have a smooth ride figuring out what we have built and saved so that they can easily benefit going forward.

What other tips and tricks do you use for organizing your files?

Image Credit: Pixabay

 

 

 

 

 

12 thoughts on “Organizing for FIRE – Financial Files

  1. Scanning and keeping digital copies is an option. I have noticed that more and more photos with your phone of signed documents are being accepted. We have been purging old bills over the last few years and not keeping them. We also have gone paperless with a number of bills too.

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  2. We pay almost all of our bills online (but a few municipalities aren’t “there” yet…) This is a good list and you are way ahead of us by having a safe for your most important items. We use a cabinet – but not a safe. Something we need to consider for sure.

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  3. In general most of the items under ridiculous to keep I don’t keep beyond the next due date. Simply put if you sign up for paperless the only record you have anyway is online. Online you can typically see your entire history. As such the last statement is really all you need in case they get hacked.

    I would keep the tax documents forever. The IRS limits do not apply if you omit certain forms.

    For housing documents I think it’s pushed because of having a record of your title insurance. This is all you really need, somewhere down the road if an issue occurs with the title of a property you have sold you could be party in the lawsuit. That insurance you bought way back at purchase will pay for your lawyer.

    I don’t use a security safe for the documents you mentioned, but I do use a small fireproof one. I doubt many people would benefit from stealing these documents (too traceable) but it would cause severe pain if they burned up in a fire.

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  4. I don’t see keeping bills much past when you get the next one and note that they got your last payment. For credit card statements, though, it makes sense for us to keep them like bank statements…they tend to have information that we can use for taxes (rental repair purchases, medical expenses, etc.)

    Our biggest paperwork hassle is that we aren’t always quick to shred the junkmail, despite our best efforts. So we tend to have a stack of stuff around that really needs to be shredded or burned, and before we know it the amount to be destroyed piles up. If we could just shred it the same day, there would be a lot less paper clutter around.

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  5. Comments on two entries:
    The reason to keep house sale information forever is to properly calculate your capital gains exemption from any gains on your house sale. This is cumulative over your lifetime, but really most important for people who might go over it ($250k per person / $500k for a married couple) and want to prove it to the tax man on the sale they go over.

    For pay stubs, the big reason I see is to confirm your social security withholding. Since you only get confirmation statements every 5 years, if at all, then you need some proof to back up your claim of a miscalculation on the government’s part, or face quite a trial of trying to reconstruct the info. You could say that you are cleared after your confirm with a statement, but given that the program is likely to get mucked with in the near future, I would say it could be handy to keep a longer history–or, at least, the prior confirmation statement.

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  6. Great recommendations all around, Mr. Firestation. I would echo what Matt said above regarding closing documents, and also add that these documents can be helpful in supporting your title insurance situation if ever there were doubts about true ownership of a home, whether your current home or a former property. It probably isn’t necessary in this regard, but it could be helpful in a pinch.

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