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Financial Document Retention

Financial Document Retention

August 21, 2022
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Document Retention

Hi everyone, and welcome back to Melissa Making Cents!


Over the past few weeks, we’ve been taking a return to the basics approach to our discussions about financial planning is as well as what certified financial planners financial coaches do for their clients! I see returning to the basic elements and building blocks of financial planning as an important thing for us for a few reasons!

For one, there are always new people who are just discovering our blog and financial planning! It’s important to get them up-to-date and sort of caught up with what we’re talking about – and sometimes that means repeating information or reiterating certain points we’ve made in the past in new and different ways!

Another reason to revisit the basics of financial planning is because I’m always growing, and information is ever-changing. While (not to toot my own horn) I’m very good at my job and in what I do, learning never stops! In fact, it would be a terrible disservice to you all if I learned all my information one time and never changed or bothered to learn more. There are also new products, services, and situations that arise over the years and it’s important to find out how those new subjects relate to the basics of our understanding of financial planning!

Okay, so that brings us to the topic of discussion for today. Document retention! I’m not going to lie; this isn’t the most exciting topic in the world. However, if you stick with me, I promise to do my best to keep it interesting and informative! While Document retention isn’t something you’re probably sitting on the edge of your seat to read about, it’s a crucial element to financial planning, budgeting, and making your financial dreams a reality!

Document Retention

Read about document retention from Melissa Cox CFP

If you’re working towards your financial goals, chances are you’re getting about nine-billion pieces of mail from different institutions. All that mail can begin to feel totally unimportant and burdensome! If you’re like so many others who prefer a clean and clutter-free house, it can easily become enticing and very tempting to start throwing those pieces of mail away as it comes in. However, throwing mail away may not always be your best option. In fact, it could get you into some deep and concerning water with financial institutions, government tax departments, or even for some reasons you may not totally understand.


Melissa Cox CFP talks about document retention strategy


Document retention is the good practice of keeping pertinent and important pieces of financial documentation for designated amounts of time and organizing that documentation in a comprehensive way that’s easy for you to remember and understand. That’s a fancy way of saying that document retention is a way for you to keep important information and keep it well organized. Doing so is simple and an effective way to save yourself from headaches later down the line when you inevitably need documentation for some reason or another! And believe me, eventually, for one reason or another,  you're going to need to find some documentation and you’ll be wishing that you’d stayed on top of your document retention and organization.


Why Throwing Everything Away is a Bad Idea

Melissa cox CFP encourages you not to throw all your documents away

Let’s talk about a few reasons why throwing away financial documentation is a bad idea. There are several reasons that it’s not best practice. Firstly, there’s always a chance (even if you’re doing everything right) that you’ll be selected for a random audit by either the IRS or your own state or local tax department. If this is the case, and you haven’t been keeping good and organized records of your finances, you’re going to have a seriously not-so-fun time trying to hunt down as much paperwork as you can.

While it’s easy to believe that everything’s online, and there’s no reason to keep physical copies of anything, that isn’t the case either! Unfortunately having redundancies in 2020s is as important as it has ever been. Having your documentation online is a convenient and typically effective way to go about your files. However, websites and the cloud are very much rooted in the physical world. As consumers, we’re often unaware of how many redundancies and backups those who we’re trusting to keep our records have. Often, “the cloud” of a company or a company’s data-backup may be in one off-site (or worse, on-site) location. This means that if you’re putting all your trust in their ability to retain your documentation, you might be in for a rude awakening if a natural disaster, cyber-attack, or some other form of data loss occurs. In that case, it could take weeks, months, or years to recover lost data and documentation – or worse, it could be gone forever.


Melissa Cox CFP asks is there is a risk to throwing away everything?

However, there’s an even more simple reason to not throw away financial mail, especially before reading it through and being sure it’s not important. Not too long ago, I talked to a friend who had been waiting for a company credit card in the mail. Unfortunately, this friend never told her husband that the card was coming, and he chalked this unexpected letter from a financial institution they didn’t use up to being yet another piece of pre-approval junk mail. Well… weeks passed, and the wife began questioning where on earth her company card was – turns out, it was in a landfill. Getting in touch with the bank, proving her identity, and getting a new card was very difficult as she needed to create an online account with… (get this) … the last four digits of her new card to request a replacement.

That leads me to my final point about throwing away financial documentation. Even when something is ready to be thrown away, it’s important that it’s done in a safe and secure manner. You can’t just throw away documents (or cards) that have your name, address, bank number, etc. on them. And while financial institutions are pretty good about censoring sensitive information, they aren’t infallible. So, when it comes time to throw away those old records, make sure that you’re destroying them either with fire, a shredder, or by blacking out sensitive information so no malicious parties get ahold of your information.

Spring Cleaning

Documents to Retain

You’re probably wondering… what are the important documents that need to be retained and organized. Don’t worry, I’ve pulled from a variety of sources to create a comprehensive list of document types that should be saved and put away! Of course, keep in mind that not all these categories will apply to each person. It would be a great exercise for you and your financial planner to sit down and talk about which document types are applicable to you and your life!

  • Business Documentation

If you’ve ever been an owner of a business, you know that there’s so much documentation that goes along with creating them (typically, unless you’re in a state that requires no documentation for setting up a sole proprietorship). Whether you’re the creator/owner of an LLC, PLLC, Co-Op, C Corporation, S Corporation, or Partnership (or sole proprietorship depending on your state), the creation of your business comes with a ton of important paperwork. You should be aware of where this paperwork is and how to always get to it.

  • Taxes

Everyone needs to save and organize their tax records. Keep records of your tax returns, any letters from state or federal Departments of Revenue, and just generally any documentation or information that’s at all pertinent to your taxes. It can be tempting to ditch all that old documentation when you’re done with the tax process for the year; however, you never know if there’ll be a discrepancy that needs to be corrected down the road. And if you’re in the unlucky position of having less documentation, you’ll likely be on the losing side of the discrepancy.

Whether you’re an employee or employer, you need to keep organized records of your official interactions and documentations with the other party. This is obviously very important for employers who are keeping records of multiple employees. However, it’s also critical for employees to keep copies of any forms they’ve filled out or filed with their employers.

  • Receipts

If you’re a business-owner, you’ll find it very important to keep an organized record of your receipts. This is important from an operational standpoint but can also help you with taxes when it comes to writing off or proving expenses.

  • Business Assets/Major Assets

Keep records of any business assets or major assets. For businesses, it’s important to keep documentation of all assets. However, for the regular person, it’s also important to keep documentation about major assets like cars, houses, rentals, or whatever else.

  • Leases/Mortgage Documents

Always keep a thorough documentation of your lease agreement or Mortgage paperwork. Your home is likely the largest expense/asset, and keeping it properly documented protects you. Keep documentation of each mortgage payment, receipts, and all paperwork associated with renting or buying a home (especially closing documents).

  • Bank Statements/Correspondence/Insurance Policies

For those of you who have multiple accounts, it can be incredibly tedious how much mail your financial institution sends you in the mail (physical or electronic). However, this is valuable data that you need to keep track of, even if it doesn’t seem like it at the time. Any correspondence you have with your bank or financial institution should also be retained. The same goes for any information or documentation you receive from an insurance provider who you have a policy with.

  • Licenses

Whether a driver’s license, drivers permit, hunting license, fishing license, or whatever other kind of license you can think of – keep documents and photocopies of them, especially if they’re professional licenses.

  • Loan Documents

Last, but not least, keep any documents that pertain to loans. Whether it’s a personal loan, business loan, car loan, student loan, etc. These documents and payment records could come in handy down the road.

Creating an Organization System

Melissa Cox CFP talks about creating a document organization system

There are tons of ways to keep an organized system of records! What matters most is that it makes sense to you, and that it’s organized enough that someone who’s looking through your records in the event of a tragedy or emergency can find what they need.


Melissa Cox CFP asks what document organization system works for you.


Whether in a binder system, folder system, or file cabinet – you can organize your records by year. From there further organize them by institution, month, and type. How you go about doing this is up to you, but it may be a good idea to talk to your financial planner about good ideas and ways to keep track of your information.

Keeping Electronic Copies

Melissa Cox CFP talks about keeping electronic documents

Of course, it’s important to keep hard copies of your important records. However, keeping digital copies is also a very helpful practice! While I wouldn’t advise someone to exclusively keep digital documentation, it’s a fantastic way to stay organized, keep things easy to find, (Control/Command + F) search for specific phrases and keywords, and backup your documentation.


Melissa Cox CFP explains electronic storage


While banks and companies often keep electronic records hosted by their own networks – you get brownie points for keeping your own locally or cloud-hosted documentation/file system. Between company records, physical records, and your own digital records – this creates a triple redundancy that’s less prone to data loss!

Cyber Security

Melissa Cox CFP talks about cyber security and document storage

While triple redundancy for your important documents and organization are fantastic, it also poses a new set of challenges. In the digital age we live in, cybercrime is a fact of life. Luckily, a hacker or cybercriminal doesn’t break into your physical filing cabinet; however, they could break into your digital one – especially if it’s hosted on a cloud network.


Learn about cyber security and document storage

The best solution is a proactive approach to proper password management. Like throwing away spam mail, it can be tempting to reuse old passwords, so you don’t have to remember tons of different logins. Unfortunately, there isn’t much we can do about various company/institutional security. However, this leaves you incredibly vulnerable to data theft. Instead, consider using a password management tool, like Keeper, LastPass, or even Apple’s Keychain to keep track (and automatically input) strong and unique passwords, especially with your important accounts. This approach helps slow down cybercriminals. Instead of breaking into one of your accounts, and then having the password to everything you have – they have a single password to one account that you can then boot them out of, and change should anyone hack it.


Melissa Cox CFP explains the benefits of Two-Factor Authentication


Next, make sure that you have strong security questions that are unique to each account set up. This will further stop hackers from infiltrating multiple accounts or resetting your password. Lastly, while it can be a pain – set up Two-Factor Authentication wherever possible. This sends a verification code to your phone number, which you then input into whatever website or account you’re logging into.

How Long to Keep Documents

Melissa Cox CFP explains how long you should keep documents

The general rule of thumb is that individuals should retain most of their documentation for seven years. If you’re a business or business owner, the timeframe could be longer depending on the specific sort of documentation that you’re talking about. However, there are certain items and documentation that should obviously never be thrown away.

Never throw away things like birth certificates, social security cards, passports, citizenship documentation, business creation records, marriage certificates, diplomas, titles/deeds, or mortgage documentation.

A Cool Way to Digitize Mailed Documents!

Melissa Cox CFP shows you a neat way to digitize documents at home

Lastly, I want to tell you about a cool way to create digital documents! We all know that there are some businesses that refuse to create any sort of digital footprint. In fact, I have a friend whose gas provider is this way. To create that redundancy that we’ve been talking about – you might want to scan it to create a digital PDF that you can keep on your computer, backup hard drive, or cloud network.

The only problem? I don’t know about you all, but in my opinion, putting things into the scanner is always a huge pain in the rear end. The solution to this is a portable scanner! These are great, especially when they work with an application that you can have on your phone. You simply feed your document through the scanner, put the hard copy into your filing system, and then voila! A digital copy of the document is available on your phone/computer.


Portable Scanners are an inexpensive way to digitize documents at home.


If you're interested in learning more about document retention or creating a system to organize your financial information, please call or email to schedule an appointment with me. We can create a plan to document, retain, and organize financial records with security and redundancy in mind!


Schedule a call with Melissa Cox CFP®



Until next time...this is Melissa Making Cents!

Melissa Anne Cox, CERTIFIED FINANCIAL PLANNER™, is a College Planning and Student Loan Advisor and Financial Coach in Dallas, Texas.


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