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Year-end financial details, December 2011

The watchwords in real estate are location, location, location. The personal financial world has its own triplicate mantra: details, details, details.

Year-end_money_moves_detailsSure, you were meticulous in making your year-end tax, investing, retirement and giving moves. But there's still some financial housekeeping left.

Get organized
You have all your financial documents, but are they easily accessible? I'll admit that I too often tend to let things stack up in my email inbox or, when they're in paper form, on the floor next to my filing cabinet.

That means I have to sort through the stack when I need a document or search my email box. But eventually I get in gear and put the material in appropriate folders, either on my computer or in my filing cabinets.

Since I'm sure you're already much more organized, you're ready for the next step: culling, deleting and archiving. USAA has compiled the handy table below on what documents to keep for how long:

What How Long to Keep Why
Tax returns (including receipts and supporting documents) Up to six full years The IRS can audit a return up to three years after you've filed. The agency can challenge your return for up to six years if it suspects you under-reported your income by 25 percent or more.
IRA contribution records Permanently Keeping these forms, like IRS Form 5498 and 8606, may prevent you from paying too much tax when you tap your nest egg.
Investment and real estate records Seven years after you sell These help track your cost basis and the taxes you owe when you sell. You can shred your monthly statements and save the annual summaries.
Bank statements and checks One month to seven years, depending on whether your bank has them available online You could need them if you're audited by the IRS. If you haven't already, switch to receiving your bank documents online. Your bank may have past statements available online.
Credit card statements and bills for non-deductible items Shred immediately after the next statement arrives. You don't need them once you confirm the charges and have proof of payments.
Form W-2 Wage and Tax Statement Until you start receiving Social Security benefits These are usually your best proof of earnings for Social Security.
Pay stubs Until the end of the year They’re not needed once you get your W-2.
Insurance policies Until they expire — except for liability policies with "occurrence" coverage Occurrence-based policies cover you for damages that occur while the policy was in effect, even if the claim happens after coverage expires.
Receipts For day-to-day debit and credit charges, you can toss after confirming the amount charged is correct.

For big-ticket items, hang onto the receipts with other purchase documentation for proof of value in case of loss or damage.

For charitable donations, keep them for tax-filing purposes.
Depending on the type, amount and reason for the purchase, receipts may be necessary for insurance claims and tax-filing.

Again, it's your choice of paper or digital. Either is fine as long as it's a record keeping system you're comfortable with and will keep it up to date.

If you go electronic, periodically copy your documents to a flash drive or CD and then put it in a safe deposit box or other secure place.

Create a financial cheat sheet
Now that you have your financial documents in order, it's time to create an overview document. Or as I like to call it, cheat sheet.

This is a one-pager of your and your family's critical fiscal data. It includes not only the details you know about each other -- birth dates, Social Security numbers, extended family contact info, employment data -- but also other important info, such as driver's license numbers and credit card account numbers (some card companies issue each account holder a slightly different set of digits).

Your financial cheat sheet also should include:

  • Location of wills, trusts, dates completed, attorney, executors, birth certificate information and location 
  • All checking, savings, money market accounts, etc.  
  • Safety deposit box information  
  • Annuities, dividends, interest earned, part time jobs, business, etc. 
  • Brokerage accounts, 401(k), SEP/Keogh, stocks, IRAs, bonds, etc.  
  • Vehicle registration, licensing and maintenance data
  • Deeds to your residence and other real property; note balances owed, loan company information and account numbers  
  • Insurance policies on your residence, vacation property; include account numbers, addresses, amount of coverage, agent's name and address, etc.  
  • Other insurance, e.g., life, health, auto, long-term care, umbrella policies; include account numbers, addresses, amount of coverage, agent's name and address, etc.  
  • Creditor data, including the companies and the account numbers, e.g., personal loans, credit card accounts, balances owed, etc.

Again, duplication is important. Make a copy for safe keeping and another to give to your attorney and/or financial adviser.

Don't forget passwords
This information should be on your cheat sheet. Or if you want to keep it separate, that's fine, too. But one way or another, you need to list all your password data.

Account passwords are especially important if something happens to you and you're the one who handles finances for your family. Your partner then will be able to take care of things until you're able to get back to your normal routine.

For that reason, also be sure to include share your computer account passwords, as well as your security Q&As.

Tend to your estate
The federal estate tax is set through 2012, but who knows what Congress will do as the law nears expiration again.

The best anyone with enough assets to be affected can do is prepare. If that's you, talk with an estate tax attorney and look at options to reduce any potential IRS bite.

And regardless of how much you own, you still need the basics, such as a will. You want to decide who gets what, not leave that to some judge.

You can, and should, revise your estate documents and will as your situation (and estate tax laws) change. But you need to have something in place now.

Budget, budget, budget
This post started with a three-part admonition and it closes with one. Budget, budget, budget.

When you make your annual New Year's Resolutions in a few weeks, put making a budget at the top of your list.

To many people, the word budget is just another way of saying "you can't have that." But a budget actually is a way to get what you want, as long as you understand that financial choices must be made and you make those decisions wisely. 

You can find an overview of budgeting in my Austin Woman magazine story. And Kiplinger has a good, basic budget worksheet.

I know this seems like a lot to tend to in just a few weeks. Don't let the scope deter you.

You can take care of these tasks year-round. But at least note now which key financial details you need to attend to when you have more time.

You also might find these items of interest:


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Robert D Flach


I recommend keeping the actual tax return forever - as a kind of financial history.


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