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The Paper Chase

Finding that important document doesn't have to be an ordeal.

"Where's my fabric cutting board, sweetheart?"


"Is that the big, bulky cardboard thingy that you keep under the bed?" Jim asked, slinking into the living room.

Joyce clenched her teeth. "Yes."

Jim shuffled his feet. "I gave it and a bunch of other stuff to the Vietnam Veteran's Association while you were at that ladies retreat last month."

Jim was a neat freak.

Joyce was not.

She didn't mind a bit of clutter here and there and liked to hang on to things in case "she might need them one day."

Jim learned to be excessively tidy when subjected to surprise inspections in the Army. He often threw or gave things away, not understanding the need to keep them—even financial records. If the bank account balanced, he'd discard the statement. If the credit card bill checked out, he tossed all the paperwork. Once, when the couple needed some tax returns for an adjustment credit, they didn't have them. Jim had thrown them away because "they were two years old."

When it comes to financial records, many may share Jim's sentiments—they want to get rid of that extra paper. Some homes become a firetrap with piled up records, others a document trap where the couple can't find anything without digging through warranties from electronics they haven't owned for years.

By burying themselves in paper and print, couples can set themselves up for extra stress. But there is a way to get rid of that extra padding by following two basic rules that apply to streamlining excess paper:

1. No matter what filing system you use to organize important documents, it's imperative that you as a couple set up a system that works.

2. Shred financial documents before you discard them; don't set yourself up to be a victim of identity theft.

Part of Jim's problem was that he didn't understand why he needed to keep certain records but could discard others. Here's a neat-freak friendly guide to understanding why some records should be kept so they're easily located when you need them.

Tax records.

The rule of thumb is to keep tax records for at least six years. "If there is an underreported income, the irs can go back six years in its audit," says Phil Beasley, spokesman for the Internal Revenue Service in Dallas.

Receipts, canceled checks, and other documents that support an item of income, a deduction, or a charitable donation should be kept until the statute of limitations ends for that return. That date is usually three years from the date the original return was filed or two years from the date the tax was paid, whichever is later.

Real estate.

Keep any records that determine the basis of the property. The basis is the original cost of the home or property and is used to determine a gain or loss when the property is sold. It's also used to determine the depreciation if the home is used in part for business purposes or rent.

It's a good idea to hang on to all documents as long as there's ownership of the property (or a portion of the property). This would include receipts and records on home improvements. These receipts could prove critical at tax time when the property is sold and capital gains tax is calculated.

Mortgage documents.

As in other real estate, it is critical to hold on to this paperwork as long as the couple owns the property.

Bank and investment records.

These should be kept as long as a couple may need to substantiate claims made on a tax return or to verify transactions. For some business owners, this could be the extent of the statute of limitations on the tax return. For those who pay child support or alimony, this could be until the child turns 18.

Insurance policies.

Generally, these should be kept as long as there's ownership of the policy. There are, however, two exceptions:

Life Insurance. There are some kinds of life insurance policies that may still have residual value even after the policy has lapsed. In some of these cases, the cash value of the policy is transferred to the premium until the cash value runs out. So check with a broker or the insurance company before tossing a life insurance policy.

Auto Insurance. Almost all car loans require the borrower to carry comprehensive and collision insurance on the automobile. If the individual does not provide proof of insurance, the banker has the option of adding this coverage to the note. A copy of the insurance policy proves this coverage has been maintained and could serve to have errant charges reversed.

Utility bills.

If the bill is correct and it's been paid, then there should be no need to keep this document after the next statement comes. If there has been a recent switch in utility providers and there's been a contract signed to purchase electricity for a certain period, keeping the bills for the full extent of the contract would be helpful.

Credit card statements.

The basic statements should be kept long enough to verify the purchase and to ensure that no one has made any unauthorized charges. However, if these statements are used to substantiate home improvement purchases, rental property expenses, or business expenses filed under a sole-proprietorship or small business, then they should be kept along with other tax records and would be subject to the statute of limitations on the tax return.

With the prevalence of identity theft, it's probably a good idea to hold on to credit card statements for up to six months past the time the purchases have been verified and the bill has been scanned for unauthorized use. The reason for this extra precaution is the fact that most identity theft isn't detected until months after the identity has been assumed.

Due to new federal consumer protection laws, each person is allowed a free copy of their credit report every year. Since there are three major credit reporting bureaus, this means each spouse can get a free copy every four months. The following agencies' references can be written into a daytimer or palm pilot as a reminder to order one of the three free credit report copies every four months.

Equifax (800-685-1111), www.Equifax.com
Experian (888-397-3742), www.Experian.com
TransUnion (800-916-8800), www.Transunion.com
Order free copies from: Annualcreditreport.com
Annual Credit Report Request Service
P. O. Box 105281
Atlanta, GA 30348-5281

Jim and Joyce decided to play the "save or toss" game as they went through their financial records. Jim, neatnik that he was, came up with a functional system to store existing records, and Joyce was able to follow his arrangement with relative ease. Now they can find their records—and they don't have to dig through a mountain of paperwork before they do.

Ellie Kay, MP regular contributor and international speaker, is author of numerous books, including The Debt Diet
(Bethany). To visit Ellie, go to www.elliekay.com.

Read more articles that highlight writing by Christian women at ChristianityToday.com/Women

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Marriage; Money; Organization
Today's Christian Woman, Winter, 2005
Posted September 12, 2008

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