Spark Joy by Tidying Up Financial Clutter

by | Dec 27, 2021 | Wealth Management

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“Life truly begins only after you have put your house in order.” – Marie Kondo

Marie Kondo, the tidying expert and bestselling author, encourages tidying by category (not by location) and keeping only those things that speak to the heart, and discard items that no longer spark joy. The end of the year is the perfect time to say goodbye and discard your financial clutter. The problem is many of us don’t equate holding onto financial paperwork with untidiness. We think it’s important stuff we’ll need at some point. But truthfully, most of it’s really not worth keeping.

Here’s what you need to hang onto and for how long:

Items to KeepWhen to Toss
Medical billsOnce the claim has been paid, you don’t need these any longer, unless you’re deducting the medical expense on your annual tax return or for documentation of your qualified HSA-reimbursable medical expenses. Then follow IRS guidelines for keeping these bills if you itemize your deductions or for your Health Savings Account (HSA).
Utility billsTypically, you could dispose of these after your bill has been paid. If you anticipate selling your home, hang onto the last years’ worth to help potential homeowners.
Documentation of major loans and insurance policiesKeep these along with all of your important identification papers (birth certificates, marriage license, Social Security cards, passports, etc.) in a secure spot, such as a safe deposit box at your local bank or a firebox at home. Keep payoff statements forever.
Annual tax returns and supporting documentsKeep the most recent three years. You can be audited for up to seven by the IRS (see irs.gov for additional information).
PaystubsKeep these until you’ve received your annual W-2 form
Property records that show improvements to your homeThese can be used when selling a home to offset capital gains when the property is eventually sold. Keep until the house is put up for sale.
Bank statementsKeep these for one year
Investment documentsKeep all capital gains tax reports for three years

Source: Hartford Funds, “Tidying Up Financial Clutter”, 2021

For the important stuff that remains, develop an easy-to-follow filing system that you’ll use. Categorize, label, and keep them in a drawer or filing cabinet. Or better yet, switch to digital. Although opting into e-delivery helps prevent additional physical clutter, you may still have a big mess on your hands in time. So, make sure you employ the same thinking there as with your desk. Keep it clean and organized.

Get started now and spark joy by leaving room for the important financial documents and create space in your day by tidying up your financial clutter.

Source: https://www.hartfordfunds.com/practice-management/client-conversations/tidying-up-financial-clutter.html

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.

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