I started cleaning up my desk this morning and as I was organizing everything into piles (yes I'm a pile person), I realized I had TONS of debit card receipts, invoices, my tax documents, etc just sprawling all over my desk.  It was like attack of the Blob, but with paper and tons of numbers!

In deciding what to keep and what to shred, I did some research. I figured with Spring Cleaning just around the corner, what better time to clean up your financial pile (or drawer......you know you have one or the other).

(Remember whatever papers you get rid of be sure to shred them and don't just throw them in the trash.  That's a sure fire invitation for identity theft!!)

This is what I discovered (taken from Suze Orman site):

"Keep till warranty expires or can no longer return or exchange

• Sales Receipts (Unless needed for tax purposes and then keep for 3 years)

What to keep for 1 month

• ATM Printouts (When you balance your checkbook each month throw out the ATM receipts)

What to keep for 1 year

• Paycheck Stubs (You can get rid of once you have compared to your W2 & annual social security statement)
• Utility Bills (You can throw out after one year, unless you're using these as a deduction like a home office --then you need to keep them for 3 years after you've filed that tax return)
• Cancelled Checks (Unless needed for tax purposes and then you need to keep for 3 years)
• Credit Card Receipts (Unless needed for tax purposes and then you need to keep for 3 years)
• Bank Statements (Unless needed for tax purposes and then you need to keep for 3 years)
• Quarterly Investment Statements (Hold on to until you get your annual statement)

What to keep for 3 years

• Income Tax Returns (Please keep in mind that you can be audited by the IRS for no reason up to three years after you filed a tax return. If you omit 25% of your gross income that goes up to 6 years and if you don't file a tax return at all, there is no statute of limitations.)
• Medical Bills and Cancelled Insurance Policies
• Records of Selling a House (Documentation for Capital Gains Tax)
• Records of Selling a Stock (Documentation for Capital Gains Tax)
• Receipts, Cancelled Checks and other Documents that Support Income or a Deduction on your Tax Return (Keep 3 years from the date the return was filed or 2 years from the date the tax was paid -- which ever is later)
  
• Annual Investment Statement (Hold onto 3 years after you sell your investment.)

What to keep for 7 years

• Records of Satisfied Loans

What to hold while active

• Contracts
• Insurance Documents
• Stock Certificates
• Property Records
• Stock Records
• Records of Pensions and Retirement Plans
• Property Tax Records Disputed Bills (Keep the bill until the dispute is resolved)
• Home Improvement Records (Hold for at least 3 years after the due date for the tax return that includes the income or loss on the asset when it's sold)

Keep Forever

• Marriage Licenses
• Birth Certificates
• Wills
• Adoption Papers
• Death Certificates
• Records of Paid Mortgages

* These documents should be kept in a very safe place, like a safety deposit box."

Let me add this point: When you totally pay off a debt, keep the canceled check along with the letter from the company stating the debt has been settled FOREVER!!  If you don't, you can be sure that it will come back and bite you.  Trust me cause I've been there and done that. I had to pay a $600 credit card bill because I didn't keep the original paperwork showing the card had been settled and was canceled. Only took me one time to learn that lesson!!

For this reason, I invested in a small 2 drawer filing cabinet. So much easier......now if I'll just start using it more.

I also keep IRS returns longer than 3 years.  I'm pretty sure I have all the returns I've filed since about 97.  I know for fact I have them since 2000.  In 2000 I started filing using TurboTax.  Because I don't trust little electronic disks to keep track of all my information, I still keep the hard records just in case.  The IRS is one organization I'd rather not but heads with.

I have found a small fireproof safe is perfect to keep warrantied and copies of Marriage Licenses, Birth Certificates, etc.  Plus in an emergency, it's easy to grab and take with you.

So there you have it.  Now you know what should be shredded and what should be kept! 

Happy Sorting!!

This blog is brought to you by: Lifeway Personal Financial Coaching

What is compound interest and why do I need to be taking advantage of it's power?

Yes, I'm talking about the same type of interest in which every credit card company uses to rob you blind.  Every auto & home loan also use compound interest to squeeze every last penny out of your pockets. What a lot of people don't realize is, you can also use compound interest in your favor.  Banks use compound interest on most savings accounts.  That means you can apply the same principals the loan sharks use and use it to help build your personal wealth!

Here We Go!
For example, you open a savings account that pays 5% interest. You in put $1,000 and let it sit for future emergencies. (AKA: THE EMERGENCY FUND)  To keep it simple, we’ll say it compounds annually (meaning you only figure up the interest on it once a year).
At the end of the first year, that account has $1,050 in it. You have your original $1,000, plus you have 5% interest on it – $50. You just earned $50 for just keeping your hands off your Emergency Fund!!

At the end of the second year, the account now has $1,102.50 in it. You have the $1,050 you had in it after the first year ($1000 deposit + $50 interest earned), but this year it earned more interest – $52.50.

Why?
The interest earned during the first year is now earning interest. WHAT????  You didn’t just earn interest on the first $1,000. You also earned it on the $50 in interest from the first year – an extra $2.50! THAT'S AWESOME!!!

Confused?  Let's try it one more time!
At the end of the third year, the account now has $1,157.63 in it. You have the $1,102.50 ($1000 original deposit + $50 first year interest+$52.50 second year interest), but this year it earned $55.13 in interest.
Now, from the first year to the second year, your interest grew from $50 to $52.50 – an increase of $2.50. From the second year to the third year, your interest actually grew even more – jumping from $52.50 to $55.13 is a $2.63 increase in interest!!!  All this for just leaving your money in the savings account and not taking it out to buy useless stuff!

At the five year mark, you’d have $1,276.28 in the account.
At the ten year mark, you’d have $1,628.90 in the account.
At the twenty year mark, you’d have $2,653.30 in the account. Your money has more than doubled without you lifting a finger, and every single year, the money has grown more than it did the year before.  That’s the power of compound interest!!!


Just imagine what could happen if you keep depositing money in the account or have a larger initial deposit???


Compound Interest Is Great, But There’s a Catch
What’s the catch?
In order to really enjoy the power of compound interest, you have to let your money sit for a long time.
In the example, the money has doubled, but it took fourteen years for it to happen. That’s a long time....  BUT!! 


This is where the tortoise outsmarts the hare! Good things come to those who wait!  Patience is a virtue! 
All the other sayings on waiting apply here.  Those who are smart with money, not just "book smart", know that there is no sure bet.  There is no magic plan.  There is no quick fix.  Building true wealth takes time and you have to stick with it!

There it is!! 
Compound Interest in a nutshell.  Not too bad really once you get the hang of it.  This is one of the reason's God made Financial Calculators!!!!! Here is a link to an online calculator that will figure it for you.  Go on and start playing with some numbers!

This blog is brought to you by:
Lifeway Personal Financial Coaching