Author: Family Resource Management Specialist, Department of Extension Home Economics, New Mexico State University.
There are few hard-and-fast rules on what records to dispose of or to keep. Circumstances occur that we cannot anticipate, and they may require records. Newlyweds probably cannot imagine they may be involved in a contested divorce action, in which they must prove which property is separate and which is community. We never expect to be involved in a lawsuit or a fight over the inheritance of property. Experiencing a home destroyed by fire or natural disaster is stressful enough, let alone trying to come up with these important documents. When important documents that are needed for applications for financial aid or food stamps are not found or have been discarded, we might need to go through time-consuming steps or have these applications denied.
In trying to decide what to keep and what to discard, think in terms of which items might be needed in the future for proof of value, payment, cost, or ownership. This information may be needed for insurance claims, estate settlements, divorce actions, child support, tax assessments, capital gains or losses on investments or your home, food stamp applications, and tax audits. While the need to keep certain documents and the duration they should be kept may differ among individuals according to their needs, in general important documents should be divided into three categories: hyperactive file, active file, and safe deposit box.
This file contains receipts for goods and services that may require refunds in case they do not work as expected. Some receipts, such as grocery receipts and small cash items, can be thrown away as soon as you are sure that the goods do not need to be returned (i.e., they work fine, taste fine) and have recorded them in your monthly expense ledger. These receipts could be kept anywhere from a few days to a month in a kitchen drawer.
This file includes utility bills, rent receipts, and income statements that may be required for applications for programs such as educational financial assistance, bill payment assistance, and food stamps.
- Utility Bills and Receipts
- Bank Statements
- Income Tax-Related Documents: W-2, past years’ income tax returns, receipts related to flexible spending account
- Employment Records
- Health Benefit Information: health benefits, insurance, shot records
- Debt-related Information: credit card, mortgage, payday lending, educational loans
- Insurance Policies: health, car, life, long-term disability
- Copies of Important, “Safe Deposit Box” (see below) Items
- Appliance Manuals and Warranties
- Receipts of Items Under Warranty: household appliances, computer, furniture
- Education Information: certificates, diplomas, transcripts
- Other: receipts of expensive items, goods undergoing rebate process
Keep records necessary for documentation of your income tax. The Internal Revenue Service can audit a return and assess additional tax up to six years after the date of the tax return. Records of investments are needed for tax purposes, in calculating capital gains or losses. Keep records of the date and purchase price of stocks, bonds, mutual funds, and other investments. If you receive additional shares of stock as a stock dividend, or authorize a company to reinvest cash dividends in additional stock, record the dates and cost or value of the additional shares.
Households of limited income should keep their monthly (or periodical) bills, rent, and bank statements for the last six months. Applications for financial aid and food stamps usually require these documents for the past three months.
Safe Deposit Box
- Family Documents: birth, marriage, and death certificates; adoption papers; divorce decrees
- Nationality Documents: citizenship papers, passports, social security card
- Deeds and Titles: home, vehicles, business
- Household Inventory: names, serial numbers, and pictures of household items
- Veteran’s Papers
- Financial Papers: bonds and stock certificates
- Important Contracts: personal loans, rent
We obviously need to keep titles of assets for the duration that we own them. For big ticket items such as houses, cars, U.S. savings bonds, and businesses, we should keep a copy of their titles even once we no longer own them.
Check with your accountant or attorney concerning records you need to establish for estate tax purposes. Records relating to permanent improvements to your home should be kept. These will be needed (to determine the amount of capital gain or loss) for tax purposes when the home is sold. This also applies to other property you own.
A copy of your safe deposit box items should be kept in the active file. The original is usually kept at your attorney’s office or in safe deposit. We should also consider keeping electronic copies of these documents. Some documents are readily available in electronic form (e.g., insurance information, credit card statements, income statement), while others need to be scanned (e.g., titles, deeds, bonds, stocks). Saving these documents on USB drives, discs, or as e-mails saves space, but always keep in mind security issues and protect these files as you would paper copies of the documents.
Original author: Jackie Martin, former Extension Family Finance Specialist. This updated version incorporates ideas from “Keeping Family/Household Records” by U.S. General Services Administration.
To find more resources for your business, home, or family, visit the College of Agricultural, Consumer and Environmental Sciences on the World Wide Web at aces.nmsu.edu.
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Revised and electronicaly distributed May 2009, Las Cruces, NM.