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SAGE April, 1999
Spring Cleaning
Before you put away those tax documents, sweep the cobwebs from your financial nest
By Lee Matthew / Illustration by Robin McClannahan
We're galloping down the home stretch of tax season, so you've probably already dragged out that pile of financial documents and sorted through them. Why not complete the job and finish out the month with a neatly organized file cabinet? The truth is that a periodic "spring cleaning" of your financial documents is probably the only way you'll ever get control over those ever growing piles of paper.
Here are some things to think about as you sort through your paperwork:
What to toss
In general, statements and paperwork more than 6 years old can be tossed. Exceptions include permanent documents such as mortgages and deeds; paperwork on home improvements (which could potentially lower your tax burden when you sell); and trade confirmations on securities transactions in brokerage accounts.
You may have other exceptions; be sure to ask your accountant.
Mutual funds
If you hold any investments at mutual fund companies, review your year-end statements.
Typically these summarize all the activities in your account for the year.
When you've verified the accuracy of the year-end summary, you can file that and toss out the interim statements.
Important: In general, this applies to mutual fund company statements only.
Variable annuity companies do not issue year-end summaries, so you must keep all your quarterly statements. And if you have a brokerage account, ask your broker and tax adviser if you need to keep all your monthly statements.
When in doubt, hang on to them.
Bring it up to date
A big part of spring cleaning involves reviewing items that may need updating.
Begin by reading through your will and trust documents, together with any attached schedules of personal items.
Do they reflect your present situation and wishes?
Then take a look at the beneficiary designations on your retirement plans, IRAs and variable annuities.
Do you need to make any changes here?
Insurance, too
While you're at it, look over your insurance policies.
Do they reflect your present needs?
Do you need to increase life or property coverages? Should you consider an umbrella policy?
What about disability income replacement?
And your master list
As you reorganize, update your master list (see below) and keep a copy of the updated list in your active home file.
Now let's look at where you should store your documents. Most people maintain four basic kinds of files:
A SAFE DEPOSIT BOX: A safe deposit box at a bank is useful for records that may be difficult to replace.
Be sure to ask your bank about the rules governing who may open your safe deposit box right after you die.
Some banking representatives recommend carrying the box in your name, P.O.D. ("payable on death") to another person. You should also check with your insurance agent to be sure the contents of the box are adequately covered.
A SMALL FIREPROOF BOX: This is a convenient place to store vital records in your home.
ACTIVE HOME FILE: Your active home file is the heart of your current financial recordkeeping. A two-drawer metal file cabinet, or even a cardboard one, should be placed in an easily accessible location.
If it's right next to where you pay your bills, you may find it easier to keep your filing up to date.
INACTIVE HOME FILE: Your inactive home files contain records that you don't need right now, but must keep for a while.
Specialized storage boxes, available at office supply stores, may be easily kept in a closet or garage storage area.
Once you've organized everything, use the checklist accompanying this article to make a master list of where you've filed everything.
Leave it in your file cabinet (with a copy in your safe deposit box), and tell someone where it is.
Be sure to include where to find your safe deposit box, your fireproof box and the keys to both.
Lee Matthew is a financial planner in Albuquerque. She is an associate of Kathleen Winslow & Associates, LLC, and an investment adviser and Registered Representative with Financial Network Investment Corporation, a securities broker/dealer (member SIPC).
Everything in its place
For a checklist of where financial consultants suggest you file your documents, go to our web page at www.abqjournal.com/biz.
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