Keep it or shred it. Traders who are trading for themselves or as their own business can have their records out of control and this is also the case for many who are in business for themselves or who do manage a small or medium enterprise. But if you are determined to get your home office under control read on since this will definitely help you get organized.

As most of those reading this will know, it does not take long for financial records to get the best of us. An important step in any organizing system is to know what to keep and what to shred. It is easy to get overwhelmed with all the credit card bills, mortgage statements, utility bills, and the many more financial mail you will receive month after month.

Here are the records worth or are important for keeping:

 

  1. Keep your pay stubs for a year. If you have online access or you are receiving you paychecks via direct deposit, you can get away without saving your pay stubs. Errors are not common, but in case they do happen you will want to have your pay stubs around to double-check with your W-2 form. You can shred them a year after your taxes are completed.
  2. For as long as you own an investment, keep the investment records. Knowing and tracking your gains and losses when selling your investments is beneficial. Also waiting 12 months after your taxes are filed is even more prudent. These records are frequently available online and any paper copies are redundant.
  3. Keep tax returns for a minimum of four years. For a standard audit, the IRS will go back 3-4 years. If you have underreported your income by 25% or more, they can go back even further.
    • Four years is sufficient for honest tax filer. If you are not, keep at least 7 years of returns.
    • If you have domestic help like nanny, housekeeper or gardener. Keep 3-4 years of pay records.
  4. Keep Mortgage records. This includes all the documents received at closing and records of payments. Also, keep receipts related to home improvements projects.

Thankfully, there are not many records that requires to be kept. So most paperwork can be fed to your shredder (yes, we suggest that you do buy a shredder to keep financial records confidential).   Here are the records you should shred:

  1. Shred your bills. Many of your bills are not worth keeping. You should only keep those bills that are needed for tax purposes, otherwise shred it. Make sure to check your bills for accuracy first before you shred them so that you know you have or are paying correctly.
  2. Throw your junk mail, but shred preapproved credit card applications. As easy as it is to throw those annoying junk mail, you should not just throw everything away as is. Some mail you have to shred for privacy purposes and same goes with preapproved credit offerings to avoid identity theft or someone else using your card posing as you.
  3. Shred digital media containing sensitive information. There are companies who can take care of your sd cards, flash drives, hard drives, cds, and those old floppy disks. Even if you erase the hard drives some experts can still recover information from them. In case you do not have the budget, you can also hammer your digital media to smithereens. That should make it really hard for anyone to recover the information on your digital media. Some people will suggest that you burn them but that could release fumes that could harm you and the environment. So eco friendly solution is the hammer.
  4. Shred receipts not needed for tax purposes. Yes, shred those receipts most you will definitely not need for tax purposes. However, if you monitor your expenses keep those receipts for a month and once you have recorded them at the end of the month you can then shred them. In case of receipts with warranty associated with them, like buying a television with 1 year warranty, keep those receipt until after the warranty period has lapsed.
    • In general, the more expensive the item, the longer a receipt should be kept. It makes more sense to keep a receipt for a new refrigerator and oven than a pack of candy.

As a general rule, shred items that you would not want falling into the hands of strangers. If an item contains your address, social security number, passwords, credit card number and other information you do not a stranger to know about than you shred them. Everything else will depend on you if you wish to shred or just throw items away. If you are a trader or not, financial records are a part of everyday life. From ATM receipts to mortgage statements, financial papers accumulate at a rapid rate. It’s important to know which financial records are worth keeping and which are not. Avoid keeping records that serve no purpose. Keep your financial records neat and organized.