Piles of Documents on the Desk? Understand What Not to Throw Away at a Glance

When sorting through the various documents piled up in your home, you may find it difficult at times to distinguish which ones are important and which ones are not so crucial.

In reality, there are four main types of important documents that need to be properly preserved: documents that need to be kept for a long time, documents to be kept depending on the situation, documents to be kept for 3-7 years, and documents to be kept for a short period of time. Let’s take a closer look at each category.

Documents that need to be kept for a long time are those that are crucial for identity and finances, difficult to obtain again, and costly and time-consuming to reapply for. Specifically, they mainly include:

1. Documents related to personal identity: passport, driver’s license, social security card, green card, military ID, birth and adoption certificates, pet ownership documents, and identification tags.

2. Important financial documents: credit cards, debit cards, bank account and deposit documents, retirement and savings investment account proofs, student loans, car loans, mortgages, loan settlement proofs (especially debt relief agreements to prevent future disputes), etc.

3. Family relationship documents: marriage and divorce records (documents related to property distribution), estate documents (ensuring smooth and effective asset inheritance), elderly care information, death certificates (necessary documents for estate handling), etc.

4. The above three types of documents should be included in a “financial document emergency kit” prepared for potential disasters, along with an emergency contact list on paper for immediate use if needed.

Some documents do not need to be kept permanently, and their retention period depends on the specific situation:

1. Loan documents: original documents need to be kept until the loan is repaid, and after repayment, only the settlement confirmation needs to be kept.

2. Vehicle ownership certificates: need to be kept while owning the vehicle.

3. Receipts for large items: such as TVs or computers, can be kept during ownership and warranty period for repair claims.

4. Home improvement proofs: keep before selling a house, which can reduce capital gains tax by up to 250,000 for an individual or 500,000 for married couples jointly filing.

5. Investment account statements: if available online, physical copies are not necessary to retain, but record the base cost of investments for calculating tax gains and losses later on.

Tax records should be kept for 3-7 years, which is related to the statute of limitations for lawsuits. The Internal Revenue Service (IRS) in the United States recommends retaining receipts and checks that can prove income, tax deductions or credits, such as medical expenses (if paid using a health savings account, keep for 3 years). Electronic scans are also accepted by the IRS as long as they are clear digital copies that can be retrieved at any time. Keeping tax returns for consecutive years can help track social security payment history.

Credit card statements: after reconciliation, monthly statements can be shredded or converted to electronic versions and backed up.

ATM receipts and shopping receipts: can be disposed of after reconciliation.