It’s Your Money Column – Organize Your Records for Efficiency and Security

This week’s column continues my discussion of guidelines for record keeping – what to keep and what to pitch.

  • Estate planning. These documents include a living will, durable power of attorney, other health care directives and wills directing survivors on how to distribute property and trusts. Whenever you make changes, destroy old copies.
  • Health records. Keep medical bills until you have been reimbursed and to determine if you have a tax deduction. Then you can throw them away.
  • Insurance. Keep the most recent policies for auto, health, homeowners and tenants, disability and life insurance. Throw away policies that are out of date.
  • Investments/savings. Keep track of your investments and savings for three major reasons: 1) to know whether your savings are growing or shrinking (most people should take a serious look at their investment plans at least every three years and make appropriate changes); 2) for tax purposes (yearly dividends and capital gains); and 3) to keep track of your retirement plan contributions. Computer software can cut down on record-keeping chores by helping you keep track of investment purchases, dividends and sales.
  • Personal. This file includes documentation of personal events such as birth, marriage, divorce and military service. If you have lost records such as birth, marriage or divorce, you can receive replacement copies. Contact the state department of health and request cost and order information to receive copies.
  • Products. This file contains warranty information and operating instructions. Throw away expired warranties and receipts of purchase. File a household inventory that includes photographs or a videotape. Keep receipts for expensive purchases such as jewelry and antiques to support possible homeowner’s insurance claims.
  • Taxes. Keep cancelled checks and credit card bills with your tax return to support your deductions. Also file documentation for your cash expenditures. If you are audited, you’ll have no trouble supporting your tax return. Tax rules say that you may be audited for three years after you file a return. So your 2002 return (which you filed in 2003) could be challenged by the IRS through 2006. If the IRS suspects you reported 25 percent less income than you should have reported, they have six years to examine your return. This is one place where you might err on the side of being prepared and just keep your returns.
  • Vehicles. As long as you own the vehicle, keep warranty information, the car purchase order, title and maintenance records. When you sell the car, give pertinent documents to the new owner. Throw away old registration forms and expired warranties.