7 steps to spring clean your finances

Spring cleaning? We can't do your manual labor, but we can save you some time when it comes to going through piles of paperwork.

By Stacy Johnson Apr 2, 2012 5:47PM

This post comes from Brandon Ballenger at partner site Money Talks News.

Spring is here -- the season of allergies, taxes, and cleaning house.

When you get around to cleaning, don't forget the paperwork. Since tax time is when we're often sifting through paper, it's also a good time to spring clean the family finances.

In the video below, Stacy Johnson takes a look at what paperwork you can trash and what you need to keep. Check it out, and read on for more advice to simplify your life.

As Stacy said, we all have paper we don't need. So let's talk about cutting through the clutter and creating an organized system that will save you time in the future. The best place to start is where the video left off: how to handle what you're throwing away.

Shred what you shed. If it has personal information on it -- your name, address, Social Security number, and anything else you wouldn't want potential Dumpster divers to see -- you should shred it. Scissors can work, and so can simply ripping it up, but if you have lots of paper to trash, a shredder is a good investment. You can find decent shredders for less than $40.

Identity theft is a big issue (as I recently learned from personal experience). And Dumpster diving is one way crooks can get the info they need. Shredding anything with with potentially useful information is one way to protect yourself.

Throw out the obsolete. Stacy mentioned a bunch of stuff to shred and/or toss. Here's the short list:

Old utility statements.
Reconciled bank statements and ATM slips.
Reconciled credit card statements.
Old receipts and canceled checks (unless they're needed for taxes or proof of purchase for warranties).
Instruction manuals for things you no longer have.
Expired warranties.
Expired insurance policies.

Plan short, medium and long term.

Some paper will be with you for life:

Birth and marriage certificates.
Divorce, adoption, and immigration paperwork.
Legal documentation, including powers of attorney, wills, titles, deeds, and contracts.
Car titles.

Then there's the paperwork you'll need to keep, but not forever: receipts for big purchases (for insurance purposes), and the final bills of any service you drop (Internet, cable, phone) in case they say you owe them more.

Think taxes. Anything that provides support for a tax return should be kept for at least three years after the return is filed, because that's how far back the IRS typically goes when auditing. Simply look at the deductions you took and you'll know what to keep: receipts for home office equipment, professional dues, and business-related travel and entertainment expenses, as well as retirement account contributions, donations, medical expenses and deductible interest, and mortgage interest and property tax payments.

For the most part, only tax cheats need to keep paperwork longer: Under-report your income by 25% or more, and the IRS can go back six years to audit. File a fraudulent return, or fail to file one, and there's no limit, which is why everyone will also want to keep final copies of their returns forever, as proof they filed. Want more specifics? Look at IRS Publication 552.

Don't duplicate what's digital. If the goal is to have less clutter, take advantage of the Internet. Bank, insurance and investment companies usually offer your statements online. See how far back they go. If your online history is available, there's no need to keep identical paper statements at home.

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Digitize your docs. What about the stuff companies don't keep online for you? A cheap document scanner runs about $55 and will enable you to keep .pdf versions on a disc, USB drive or external hard drive, which you can email or print as necessary.

Or you can use a cloud service for storage. Some provide free access to enough space to meet most people's needs.

Start using software. Stacy mentioned the Insurance Information Institute's home inventory software. It's free and helps track the belongings in your home as well as everything from insurance policies to your investments. Another idea is Evernote, a free program that can track your documents (and just about anything) by keyword, tag, or even text inside images.

More on Money Talks News and MSN Money:

Tags:

bankingfinancial privacyidentity theftincome taxMoneyTalks NewsStacy Johnson

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