Personal Financial Record Keeping Best Practices from UT Extension Expert

Picture of papers and envelopes stacked on a table
Gatheri​ng financial documents and disposing of them properly is important for identity security and for reducing clutter at home. UT Extension advises consumers to follow these guidelines for what to keep, what to toss, how and when. Photo by Sharon McCrutcheon on Unsplash​

KNOXVILLE, Tenn. – Whether it’s hitting the gym regularly, sticking to a budget, living more simply or planning that trip you’ve been meaning to take, many Americans start the new year with goals and resolutions. But what about the stack of papers on the counter or the documents you’ve been meaning to file? Planning better systems for financial records is a great resolution as well, and experts with University of Tennessee Extension are available to help Tennesseans deal with paper clutter.

“Debit card receipts, credit card bills, bank statements, and old check ledgers all document where your money goes,” says Ann A. Berry, UT Extension consumer economist. “But these documents also take up precious space in your home and in your mind as you figure out what to do with them. Keeping these records indefinitely is unnecessary and creates clutter, which no one wants to deal with.”

Berry suggests developing a plan to manage financial paperwork regularly, keeping only those documents which are necessary and only keeping them for the required length of time as well. She advises to keep any records which would be difficult to replace in a fireproof home safe or in a safe deposit box at a financial institution. Being able to access records quickly should also be a priority, so be sure to keep files organized, either physically or electronically.

Federal tax laws require citizens to have receipts and other tax return support documentation for as long as the IRS can assess additional tax, which for most people is three years from the date you file your tax return. However, if the IRS suspects you underreported your income by more than 25 percent, this length of time doubles to six years, according to FDIC tax policy managers.

Berry outlines a reasonable financial record retention schedule below:

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Canceled checks that have no tax or other long-term purposes can be destroyed after a year. File those that support tax returns, such as charitable contributions or tax payments, keeping them for at least seven years. File and keep indefinitely any canceled checks and related receipts or documents for a home purchase or sale, renovations or other improvements to property you own. Also keep documentation for any non-deductible contributions to an Individual Retirement Account (IRA) indefinitely.

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ATM, deposit, credit card and debit card receipts should be saved until the transaction appears on your statement and you have verified the accuracy of the information. Businesses sometimes ask if you want a paper or electronic receipt, as electronic receipts (including a cell phone picture of the receipt) are sufficient for this purpose.

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Credit card and bank account statements should be saved for one year if they have no tax or other long-term significance, but file and keep the rest for up to seven years.

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Credit card contracts and other loan agreements should be kept as long as the account is active, in case you have a dispute with your lender over the terms of your contract.

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Documentation of your purchase or sale of stocks, bonds and other investments should be retained while you own the investment and then seven years after that. Berry recommends these records be kept in a safe deposit box.

Berry also suggests investing in a quality crosscut shredder
, and says bargains on these machines can be found at many types of stores this time of year. “A crosscut shredder slices the paper both horizontally and vertically, turning documents into small pieces that are harder to put back together. This can protect you from identity theft, which costs victims an average of $1,343, much more than the cost of a shredder,” she said.

Some records should always be shredded, not just discarded. These include: 

- Any documents with your social security number, bank account number or credit card number

- Any documents with your signature as identity thieves could use it to falsify other documents

- Employer pay stubs

- Monthly bills

- Expired credit cards, driver’s licenses, or other identification cards

- Prescreened credit card offers 

- Explanations of benefits from medical, dental or vision insurers

- Tax forms that are more than seven years old

- Any documents with a password or PIN

- Any other documents with personal information you would not want a stranger to see to avoid the possibility of someone stealing your identity or accessing your accounts.

An inexpensive fireproof safe can also prevent document loss in the case of a disaster and is an important step in protecting your home and financial well-being. Protecting documents from most fires, floods and tornadoes, fireproof safes are well worth the initial investment.

For additional help getting financial records and documents in order, see UT Extension Publication W223,
Important Information, on the UT Extension website. Choose the “Publications” link along the top of the page and then enter the publication number in the search engine.

Through its land-grant mission of research, teaching and extension, the University of Tennessee Institute of Agriculture touches lives and provides Real. Life. Solutions. 
ag.tennessee.edu.

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Contact:

Ann A. Berry, professor and consumer economics specialist, UT Extension, 865-974-8745, aberry9@tennessee.edu