AUGUST 11, 2014 VOLUME 21 NUMBER 29
Last week we wrote about how you could start reducing some of the paper clutter in your home. This week we continue that conversation, with some additional suggestions about what you can throw away — right now.
We suggested last week that you only really need to keep tax records for seven years. But the reality is that you can probably throw away a lot of what you think of as tax records well before that time. Do you keep copies of paid bills in a file or drawer someplace? You can stop doing that. Unless the paid bills include, say, evidence of a charitable donation, or payment of a medical bill, you probably don’t need to keep them at all, and you certainly don’t need to keep them more than the month it takes to get a new bill showing that you did, in fact, pay last month’s bill.
Maybe you don’t get paper bills at all, or only a few. It’s pretty easy to sign up for online delivery of most of your regular bills, and then you won’t have to think about what paper bills you need to keep.
Bank and brokerage statements? You can probably shred most of them pretty shortly after you receive them, especially if you have online access to them in the event that there is ever any dispute. Note, however, that many banks and brokerage houses only let you search your financial records for a limited time (though the records may be available longer if you pay them to retrieve statements). Also, if you ever change banks you may lose access to the older information. But is that a problem? Usually not — they will probably keep the records available online longer than you will ever need them.
Explanations of Benefits (EOBs)? Look at them and throw them away. They are not bills, and if you do owe anything you will get an actual bill later. Meanwhile, they are just notices that a claim has been made on your insurance (including Medicare). You are looking at them only to make sure that there is no mistake or fraudulent activity on your account. They seem so official — but for a Medicare recipient, a single doctor’s visit can end up generating half a dozen two-page documents that you don’t need to keep.
Receipts? Toss them, unless they are important for a particular reason. Why might they be important? There is the possibility that your purchase might qualify for a medical deduction on your income taxes (but not a very high likelihood). You might need to prove the value of new furniture or jewelry if you make an insurance claim some day. But the receipt for the $18 toilet plunger you just bought? Throw that paper strip away.
Mail solicitations can accumulate relentlessly. Throw them away immediately on receipt unless you are actually going to buy something, or make a donation — don’t hang on to them “just in case.” That’s how you got that giant pile of stuff you never look at on the table by your front door. In fact, start with that pile — throw it all away.
Credit card solicitations? Shred them. They are not likely to be a better deal than the card you’re now holding, and just applying can affect your credit rating. Better to get rid of them as you get them
That raises a related question: which things do you simply toss and which do you shred? Our rule is that if there is identifiable information (address, account number, full name) somewhere on the document, we shred it. That’s an abundance of caution (it’s actually pretty easy to get your name and address from public records), but it’s an easy rule to remember. We don’t usually apply that rule to catalogs, but you could rip the address page off and shred that just to keep a simple, universal rule. You might want to invest in a small home/office shredder and set it up right next to that table by the front door — you know, the one with all the unreviewed mail on it.
Here’s the thing about this effort to reduce the paper clutter in your home: your natural inclination is to keep things that you might regret having discarded some day. We think you should reverse the approach and discard things unless you’re reasonably confident that you’ll need them later. Otherwise you’ll always be awash in paper, and you’ll leave your heirs with the daunting task of wading through piles of twenty-year-old records they just have to shred.
Most of the experts on managing your home paper flow suggest that you make three or four categories of paper: things you can toss immediately, things you can toss as soon as you get the next version (like next month’s bank statement) and things you need to keep long term. And there’s nothing that stops you from scanning that last category into your computer and throwing away most of the original documents.
Maybe a better question would be: what paper is it critical that you keep? We have just these few suggestions:
- Your tax returns and the supporting documentation (W2s, 1099s, etc) for about seven years
- Your estate planning documents, and particularly your original will (speaking of which — shred all the older versions you’ve been keeping around. You don’t need them)
- Annual brokerage and retirement account statements (you don’t have to keep every monthly statement forever)
Maybe another day we’ll tackle where to keep your few remaining important papers. Hint: we’re probably not going to tell you to keep them in a safe deposit box.