Organizing Your Financial Records

February 28, 2020

One thing that is certainly true is that if you don’t like Indiana weather, wait ten minutes and it will change!  The weather seems to keep changing from winter to spring and back again.  Hopefully, it won’t be long until spring is here for good.  However, spring also means tax season, which is often a trying time.  One of the things that will help to make your life easier is being organized.  Today we are going to offer some suggestions on organizing your financial records.

The first thing you need to determine is what to keep.  Next, you need to decide how long to keep them.  Third, you need a system for keeping them organized.  Finally, you should make sure someone else has access to the records in case something happens to you.

The IRS is limited to three years to initiate an audit by the statute of limitations, and can pursue “substantial errors” for up to six years.  Therefore, the IRS recommends that you keep you tax records for at least six years. (Source:

For your other records, we suggest keeping two files, a short-term file and a long-term file.  The short-term file is for things you might need within the next 12 months.   Here you will keep your unpaid bills, paid bills, bank statements, investment statements, credit card statements, health records, and major purchase receipts. Monthly or quarterly, you can move things into your long-term file or purge them. 

Your long-term file should be purged from time to time as well.  Keep your paid household bills for three years, including your credit card statements.  Other things in your long-term file should be kept for seven years.  These items include check registers, bank statements, pay stubs, and tax returns and supporting documents.  If your bank still returns your cancelled checks, keep those for seven years as well.

Receipts and statements related to your assets should be kept forever, or until the asset is sold.  For example, some home improvement items can be added to the cost basis for your house, so you will need those records when you sell your house.  The same is true of investment assets like stocks, bonds and mutual funds.  Keep your year-end statements from investment accounts, as well as the confirmations you get when you purchase or sell and investment.  You will need this information to determine if you have capital gains or losses when you sell these assets.

At least once a year, take some time to review your files and purge them of any documents that you no longer need.  This make it considerably easier to keep things organized and ensure that you can find things when you need them.  When you eliminate documents, make sure that anything with personally identifiable information is destroyed.

Keep your records somewhere that is accessible, but segregated from your other documents.  A filing cabinet or file drawer might be a good choice.  Some people prefer a divided three-ring binder.  Any system is fine, as long as it works for you.  Some things, like stock certificates, coins, stamps or other collectibles, automobile titles, deeds, original copies of birth certificates, marriage certificates, and death certificates should be kept in a fire-proof safe or safe deposit box.  You might also keep a video tape or photos of the contents of your home, especially valuables, in case of a fire or theft.  Although it may seem counterintuitive, some things like your will, powers of attorney, and insurance policies should not be kept in a safe deposit box.  These are documents that your heirs will need when you die, and if they are in the safe deposit box they will not be accessible for a period of time.

Finally, make sure someone else knows where to find your financial files in case something happens to you.  This will make it considerably easier for them to manage your affairs when you need them to.  In the files make sure you leave instructions as to where to find other important documents.

Keeping your financial documents organized will take a little thought, planning and effort, but it will be worth it.  The effort you put into organizing things now will make it easier on you in the future.

To hear the podcast of the Smart Money Management radio show on this topic, or others, go to our website at

 The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. 

Securities and financial planning offered through LPL Financial, a registered investment advisor.  Member FINRA/SIPC