How to Organize and Secure Your Financial Documents

Data and identity protection have been hot topics in recent years. But while you probably know you need a stronger password, multi-factor authentication, and other measures for greater online security, are you also aware of the importance of physical security for your important documents? In this article, we’ll cover everything you need to know about organizing and securing your financial documents, both digital and paper.

Take stock and create categories.

You can expedite the organization process by first taking stock of all the documents and assets you'll be organizing. This applies to both digital and hard copies. For example, you may have any or all of the following:

• Car titles and/or auto loan paperwork
• Rental lease or deed to your home, closing paperwork, and mortgage statements
• Monthly statements for checking and savings accounts
• Credit card statements and related documentation
• Medical bills and explanation of benefits (EOB) statements
• Insurance policies for home/renter’s, auto, and life
• Investment and retirement account statements
• Personal loan and/or student loan paperwork and statements
• Tax returns and supporting documentation from at least the last three years
• Utilities (account contracts, bills)
• Estate planning documents such as wills, trusts, POAs, etc.

Once you’ve collected all your paperwork, divide the documents into categories and give each their own folder. Label each folder so you can find documents more easily when you need them. While a majority of your documentation may be digital, there are still a few physical documents that you should keep in a safe place, such as a passport, birth certificate, will, power of attorney documents, important titles, etc.

Choose a secure storage method for physical documents.

A small filing cabinet or dedicated drawer space should be enough for most people to file and store physical paperwork. However, a fireproof safe is a great investment for protecting not only your financial paperwork but other valuable assets. This might include documents like birth certificates and wills, as well as jewelry, cash, etc. Additionally, it can help your heirs to have a “master list” of accounts and account information/logins, which you would definitely want to keep locked away. If you don’t want to keep a safe at home, you could also use a safe deposit box.

Find secure storage for digital documents as well.

Depending on how many digital documents you have, you might want to invest in secure encryption software to protect your files. For ideas, check out this list of the best encryption software for 2021. Password protection software like the free KeePass and other paid options can also protect your online accounts from being compromised and your data from being stolen. Another option is to store digital files on an external hard drive as a backup and keep that hard drive in a safe and secure location along with your sensitive personal papers.  

Maintain your storage system.

Creating a filing system is only the first step; next comes maintenance. Stay committed to your organization system and schedule time each month, quarter, or year to get rid of outdated files, add new ones, etc. You could also include financial decluttering and organization in your spring-cleaning process so you don't fall behind.

How long should you keep your records?

Getting rid of the papers you no longer need is part of routine maintenance, but how do you know when it’s time to let certain documents go? 

• Tax Documents: Keep your returns and supporting documents for seven years. Some accountants recommend keeping the return itself (not supporting paperwork) forever. The seven-year window is due to the fact that the IRS has three years after you filed to audit your return for a good-faith error and six years to challenge you for underreporting your gross income. 
• Home Records: Homeowners should keep all paperwork related to your home purchase as well as any substantial improvements you make for at least six years after selling your home. Renters can shred old leases after moving out and receiving your security deposit.
• Loan Paperwork: Hold on to documentation for mortgages, auto loans, student and personal loans at least until you’ve repaid your debt. You may want to hold on to any confirmations that your loan is paid off for at least a year afterward in case any discrepancies arise.
• Financial Statements: Save yourself the paper clutter by signing up for e-statements. You’ll have on-demand access to past statements any time you need them instead of having to file paper copies.

Securely dispose of unnecessary documents

Shredding is the best way to dispose of old documents, especially if they include personal, medical, or financial information. Putting these documents in your curbside trash or recycling bin makes it easy for thieves to steal your sensitive personal information for fraud or identity theft purposes. 

Home shredders are relatively inexpensive, or you could collect to-be-shred papers in a bag and then take them to community shredding events or pay to have them shredded at a shipping or office supply store. 

Learn more about keeping your accounts secure!

At Town and Country Bank and Peoples Prosperity Bank, we are dedicated to the financial security of our customers. Read more about online security, sign up for a safe deposit box, and contact us with any questions about keeping your bank accounts secure.