MoneyCounts: A Financial Literacy Series Financial Clutter 11-A Grange Building University Park, PA 16802 financialliteracy.psu.edu finlit@psu.edu 814-863-0214

Description Financial clutter may not be visible. It could be a multitude of unnecessary bank accounts, a wallet filled with credit cards, or an outdated insurance policy. Financial clutter can negatively impact your financial health.  Fortunately, financial clutter can be tidied up to end the chaos so that you have a pristine financial plan.

Learning Outcome Identify financial clutter Understand the impact of clutter on your financial health Understand how to get organized Understand how to use budgeting and tax forms as a tool to clean financial clutter

CHAOS OR ORGANIZE Financial Clutter

Why clean clutter? Take control of your finances/budget Simplify financial record keeping for year-end tax Spring cleaning can clear clutter in your personal financial life just like it does for your closets and garage. Take control of your finances/budget. Simplify financial record keeping for year-end tax. Practice financial literacy skills Reduce stress and save time in the long run Practice financial literacy skills Reduce stress and save time in the long run Spring cleaning can clear clutter in your personal financial life, just like you do for your closets and garage!

Identify clutter! Make a financial inventory list You can’t clean financial clutter if you don’t know what and where it is! Make a financial inventory list Collect financial papers from all sources: Around the house, in the car, shoe boxes, etc.

Sort financial records according to categories Sort first! Sort financial records according to categories Monthly bills, pay stubs, bank statements Tax forms Retirement and investment documents Warranties and user manuals Policies and deeds Permanent records (birth certificate, passport, will, marriage license, etc)

Buy a “cross shredder” and a large pizza! Let’s clean! Buy a “cross shredder” and a large pizza! If you can get a copy of a document online for free, you do not need to keep it.  Cross shred it! Most transactions are now electronic and digital, organize online files as needed

What to keep and for how long? PAPER DOCUMENTS 7 Years 1 Year Satisfied loans Student loan records Paycheck stubs Utility bills Canceled checks Bank statements Quarterly investment statements 3 Years Income tax returns Medical bills Sales records (home, stock) Documents for tax returns Annual investment statements

Student loan documents If you are a student and have federal student loans, what do you need to keep? The fact that the Department of Education or Servicer has your student loan on file on NSLDS does not mean you should not keep your own copies of those documents.

Life cycle of records Permanent records Active records Temporary records

Permanent records Marriage & divorce licenses, separation agreements Birth & death certificates Social Security cards Wills, living wills, & advanced medical directives Trusts, estate documents, power of attorney Deeds, Records of paid mortgages Tax returns You may want to keep your tax returns indefinitely. The IRS destroys original 1040s after three years, but you and your heirs may need information from the returns at some point in the future.

Active records Insurance documents Stock certificates Property records Contracts Records of pensions and retirement plans Property tax records disputed bills Home improvement records Stock records Hold for at least three years after the due date for the tax return that includes the income or loss on the asset when it’s sold. Property records include original settlement statement from when you purchased the home, as it shows closing costs and settlement fees paid. These may be added to the cost basis calculation when you go to sell your home. Keep until the dispute is resolved. Homeowner’s insurance and auto insurance policies until new renewal arrives, then throw out.

Temporary records Receipts saved for budgeting purposes Receipts to support billing/monthly statements Grocery receipts Charges on credit cards Personal purchases Charges on debit cards Miscellaneous receipts ATM withdrawals

Which guide to follow? Budget Tax filing documents Combination of both

Budget checklist items for cleaning financial clutter Saving & investments Housing Utilities & household Personal and family care Medical Transportation & entertainment Pensions and annuities Debts Budget checklist items

Using budget items as a guide

Using tax forms as a guide for Tax forms Income and interest earned Adjustment to income Taxes and credits Medical and dental expenses Gifts to charity Mortgage interest Casualty and theft losses Using tax forms as a guide

Which financial records to review and how often? Insurance at work Investments and brokerage accounts Retirement and pension accounts Free credit card report Insurance Beneficiaries Personal information Wills and trusts accounts Amortization schedule

Strategies for success Purge & merge In a safe place Financial emergency kit Clean wallet to prevent from identity theft

MoneyCounts: A Financial Literacy Series Comments and questions 11A Grange Building University Park, PA 16802 financialliteracy.psu.edu finlit@psu.edu 814-863-0214